Good day, and thank you for standing by. Welcome to AMP Half-Year 2024 Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chief Executive Officer Alexis George. Please go ahead.
Thank you very much, Maggie, and welcome everyone to AMP's first half result. You've probably all noticed by now it's been quite a busy evening, and so we have a lot to talk about today. Of course, I am joined by our CFO, Blair Vernon, who will take us through the detailed results later in the presentation. But before we start today, I would firstly like to acknowledge the traditional custodians of the land which we're holding this meeting today, which for us is the Gadigal people of the Eora Nation. And I would like to pay my respects to the elders past and present, and to the elders past and present on the lands of which you're calling in on today. Right, so what do we want to go through today? Firstly, I just want to give a quick overview of the results.
Of course, today we also announced a transformational transaction in relation to our AMP Advice business. So I want to give you some of the details in relation to that and when we can expect to see that complete. Then Blair will go through the financial results. There's always a lot of interest in cost and capital, so we'll spend a bit of time focusing on that before we come to a summary and, of course, Q&A. So if we look at the first half results, I think it's a strong result. We can see the NPAT's up 5.4% to AUD 118 million. And that is as a result of better performing businesses. Of course, in our bank space, it's been a competitive environment, and we're certainly focused on margin over volume, but a pleasing result.
Costs, we're delivering on our promises in relation to cost, down another nearly 6.5%, and we're well on track to delivering the promised 690, although that will be adjusted at the end of the year. In fact, we have a lot of programs in place to continue through that trajectory in 2025. EPS earnings are up today, and as a result of this good result, we're able to announce a AUD 0.02 per share dividend, 20% franked. That together with the AUD 963 million capital that we've returned for buyback means that we will have delivered AUD 1.015 billion of the promised AUD 1.1 billion capital return. At this point, with volumes as they are, we expect that we'll be able to complete that AUD 1.1 billion capital return by the end of this year.
At that point, we're not at this point proposing further buyback, although we'll be diligent about capital management. We will come to the final annual result with a formal dividend policy to be able to provide capital returns on a more enduring basis. On top of the capital, on top of the costs, on top of the improvement in business results, we've also managed to continue to reduce the debt. That is pretty important for us in terms of being able to maintain those credit ratings. Of course, today we announced that transformational transaction for Advice, which I'll go into in a little bit more detail later. Just quickly, let's look at the first half progress.
We've been running under three strategic pillars: deliver performance, focus on efficiency in terms of capital cost and balance sheet, and look for those new revenue opportunities because we have to start to deliver growth as well as efficiency. On the business line performance, I've talked about the Bank. We've definitely skewed towards margin management in what is a very competitive environment. And you would have seen that in the reduction of the mortgage balances through the first half. We're seeing moderate growth through the last couple of months, and we do expect some improvement there. On Platforms and on our superannuation and investments business, they've clearly benefited from the markets as they were in June, although a little more volatile in the last few days. But both those businesses are delivering stable margins.
And we're starting to see in the case of Platforms better net inflows, and in the case of our superannuation and investments business, better retention as a result of the strong performance, the value proposition, and of course, our improving reputation. And in New Zealand, it continues to deliver good performance, and it's benefiting from the EnableMe transaction that we did last year to really help diversify the revenue. On efficiency, we've already talked about the promises that we continue to meet. By the end of the year, we've delivered the AUD 1.1 billion of capital. We're on track for meeting our cost promises, and we'll continue to look at the opportunities to improve the balance sheet through the paydown of debt. And in new revenue opportunities, we have said many times we want to become the experts in retirement.
We're starting to see growth in our retirement solutions in platform, and we want to launch a similar innovation in our Super and Investments business. On top of that, our digital small business is on track for soft launch at the end of this year to family and friends and public launch next year. We also, in the last couple of months, have launched publicly Citro, which is a community for over 50-year-olds, a social community where they can have the opportunity to get discounts, et cetera. And that is a really important component of us focusing on the retirement space. So I think lots of traction in the first half of 2024. Before we go into the detailed financial results, let me just give you an overview of the strategic partnership we announced for AMP Advice today.
As you know, we have been moving towards a break-even space for AMP Advice. But we said publicly a number of times that that last AUD 10 million-AUD 15 million of losses was going to be hard to address given the nature of our business being a regulated entity and a listed entity. And that was certainly proving to be the case. We've also publicly said that we were exploring alternative options, and we wanted to bring our Advice sales force along with us as we did explore those options. And those options, as we've discussed, could have included keeping it within AMP and going on the continued pathway towards transformation, looking for a partner or spinning it off in a NewC o.
All of the work that we did suggested that we are a scaled business, but in order to be able to continue to invest in the future, more scale was needed. So as a result, we thought partnering on at least the services side of the business made sense, finding someone who wanted to continue to invest in this business, who could provide additional services and understand the business. Then on our equity partnership side, where we own minority interests in some of our practices, there is an ongoing need for capital, capital for growth, and capital for succession. We felt having a partner there who was prepared to put large amounts of capital to help the advisors grow was really important. Today we announced that relationship with both Entireti and AZ NGA, and I'll go through that in more detail.
To give you a synopsis of the deal, we do expect completion by the end of the calendar year. We do expect that there'll be an accounting loss on sale of about AUD 30 million, which comprises some separation costs, some legal costs, and some provisions we'll book for issues in the business. We expect the capital implications to be broadly neutral, maybe slightly positive, but broadly neutral. Of course, the CEO of this new business will be the current CEO of our AMP Advice business, Matt Lawler. Let me just quickly go to a bit more detail so you can understand the construct of the deal. Firstly, we have two components of our Advice business. The first is the services business, which manages our AFSL.
That business will be sold into a new entity whereby Entireti, who is the parent company of Fortnum, a well-known financial advisor group, will own 70%, and AMP will own 30%. That 30% is to assist with the transition, but also create a real continuity as that business incorporates itself and helps to become a standalone business in its own right. The services will be provided jointly. So this is a transformational deal in that it's going to create an entity that will service 1,300 advisors in Australia, the biggest in the country, and will provide a scale to be able to continually invest. On the equity holdings, as I said, those 16 advisor practice minority holdings will be sold to AZ NGA. AZ NGA is backed by Azimut, which is a large financial services institution in Italy.
They will provide both majority and minority opportunities for our advisors, depending on where they are in their growth trajectory. I'm not going to spend a lot of time going into the details of the strategic partners, but as I said, Entireti is the parent company of Fortnum. It's existed since 2010. It's been committed to servicing advisors throughout that period of time, and many of the executives in that business would be well known to you. Matt Lawler, though, will become the new CEO of NewCo, yet to be branded, and become a part of that Entireti team. On the AZ NGA side, here we have a partner who has substantial capital behind them. He's very experienced in terms of transactions. And as I said, we'll provide opportunities for our advisors to participate from an equity perspective, both in terms of majority and minority ownership.
When we made these decisions, there were a couple of things that we took into consideration. Scale, as I said, we felt this was really important to face into the opportunities that Advice is going to experience in the future. We have a more benign regulatory environment there, and we want someone who can continue to support that. Expertise and, of course, capital. But this couldn't happen unless we had been speaking to our advisors and bringing them on this journey. And they've been broadly supportive of the NewCo opportunity that we present today. In order to help them with that transition, we will assist with some rebranding. We will assist with making sure that things are smooth for them in that transition. And by moving all the AFSLs, it doesn't require them to repaper. But certainly, we'll be taking an active interest in the remainder of that.
So if I look at the first half year, I think there's strong results, and we also have a transformational transaction that we've announced today. And on that note, Blair, I'll let you walk through the detail.
Thanks, Lex. Just going to return to, obviously, 1H 2024 financial results and walk through them in a little more detail. Firstly, the high level, I will provide some more information on each of the business units. And as Lex mentioned, as usual, we'll talk to costs and capital and also some additional context around the Advice transaction that Lex has just talked to. So just going to the 1H 2024 results overall. As Lex mentioned, the profit up 5.4% to AUD 118 million for the half, which we think is a really solid result. Revenue was down 4% on 1H 2023.
I think it's pretty well understood in terms of the NIM contraction that we were previously advised in terms of the Bank. But that's offset by good volume and margin performance across our wealth businesses. Obviously, markets helping, but also cash flows. As Lex mentioned, pleasingly, costs down 6.4% on 1H 2023 at AUD 339 million shows good progress on our business simplification program and our overall cost targets. I'll talk again to a little more of the rebasing of those later. Interest costs are down as a result of that debt repayment as we continue to manage capital and the balance sheet. And those factors together with our buyback progress combined to see earnings per share up nearly 16% over 1H 2023. Just turn to the statutory numbers where we've posted a statutory NPAT for the half of AUD 103 million.
That's obviously down on 1H 2023, but you'll recall 1H 2023 was significantly increased by the gains on sale from the AMP capital transactions at that time period. The most significant item below the line is obviously business simplification spend. On a post-tax basis, that's AUD 13 million, slightly lower than we anticipated. And that really reflects some time delays in terms of some of the project mobilization. But certainly, it doesn't deter from the overall progress we've made in terms of cost out generally. Just turning briefly to the business unit overview slide, we've tried to capture that on one page to help you in terms of a quick snapshot of the business units overall.
I'd say overall, the business units performance metrics are delivering against our guidance and our plans and the commitments we've made, whether that's stabilizing margin in the Bank and earnings, growing our wealth businesses, trimming the losses in Advice and Group, or steady performance in New Zealand. So overall, a very good result. I'll talk to the details in a moment. Just turning to NPAT overall to give you a walk through the drivers as we normally do. At a macro level, you'll see the clear NPAT of that NIM compression I talked about in the Bank as being a significant NPAT on the comparative to 1H 2023. Again, offsetting that, obviously, solid uplifts in Platforms and our Super and Investments business, which is a real standout this half, I think.
Similarly, that improved cost performance is showing through, leading to that 5.4% lift overall in terms of the profit compared to 1H 2023. Just turning now to AUM, which obviously is a key driver of our revenue signature. That AUM stock is critical for us. Overall, up 4.5% on the closing FY 2023 volume. We've seen good performance across all three wealth businesses, largely a result of market movements, but importantly, better flows generally specifically in our Platforms and Super and Investments business in Australia. Most importantly, in terms of volume, was the mix of margin, where margin has been in line with our guidance and broadly aligned to the prior year. So a very good result in terms of the half. I'm now going to turn to the business unit performance and provide a few more highlights.
Just turning firstly to the Bank, where, as indicated, profit is AUD 35 million for the half, which is down on 1H 2023, but broadly steady with H2 outcomes we saw. That really reflects the stabilization in NIM that you see through the half, where we've averaged 114 basis points, so within the guidance band that we provided at the full year results. As Lex mentioned, home loan volumes are slightly lower than we anticipated in the first half. That really reflects that intense competition we continue to see in the home loan market segments that we play in, relative to the balancing of our focus on margin management as our most important. Correspondingly, though, costs have been reduced in the Bank as we see lower overall volumes and careful management of costs given we knew the NIM compression was emerging. Overall, I think a very good result.
We are seeing some increased volumes, again, as Lex mentioned, in the last few weeks. So we are hopeful of some improved volumes through the second half, getting us closer back to that opening position in terms of volumes overall for the Bank. Net interest margin detail. We've provided a walk of the first half relative to the closing position for 2H 2023. As I said, broadly stable, down one basis point in terms of the overall position. There's been some asset mix changes that have been positive. That's mostly two elements, one being backbook to frontbook maturities, but also the continuing fixed variable roles, which are largely through, although there is some remaining fixed role in the second half, which we watch closely. Offsetting that, obviously, is the ongoing competitive pressure in the deposit market, and particularly in this half for us has been core deposits.
So some margin contraction there, leading to that 114 basis point position for the half. Just turning now to credit quality metrics across the Bank. I'd characterize these as remaining positive overall when we look at the total book. There has been an increase in 30 and 90 days arrears as we've graphed there, albeit we don't see those trends as necessarily inconsistent with the sector overall. Recent weeks, again, have seen a leveling off in terms of those metrics. Our actual experience in debt write-offs in the half is reflective of our very conservative credit position and actual basis, but only AUD 220,000 of write-offs in the half. The other two key metrics we've graphed here are two that we particularly look at in terms of forward indicators. The bottom left shows two-thirds of our clients enjoy an LVR under 70%, so significantly.
I think most importantly, the top left graph shows eight out of 10 of our customers are ahead on repayments, four out of 10 are ahead by four months. That continues to be relatively stable and shows our clients in the majority weathering the current pressure in terms of the mortgage market. Turning now to Platforms, where NPAT for the period is up over 22% compared to 1H 2023 at AUD 54 million. Average AUM in the period was AUD 73 billion, or just over AUD 73.5 billion. As I mentioned, reflecting positive markets, but also pleasingly the improved cash flow performance in the half, up over 50% to AUD 1.16 billion when we exclude pension payments. Controllable costs are a little higher, just over 1% in the Platforms business.
That reflects exactly as we've guided in terms of our ongoing investment in this critical business unit as it continues to emerge as a key part of our growth story. Another key milestone in the half was the continued progress in terms of growth of our IFA flows, up 30% in the half and now representing more than 1/3 of our total inflows to the platform. Just in terms of that NPAT walk for the half, up 22% as I noted. Over 1H 2023, most of that is attributable to the improved market conditions and stronger cash flows. There's a more modest contribution from North Guarantee in this period, reflecting progress in the overall underlying business of the platform entity. We'll provide a little more detail in terms of the platform margin mix. We can see there's a relatively even mix of admin and other fees as we categorize them.
In 1H 2024, in fact, admin fees tipped over, representing just over 50% of our proportionate component. The other fees are influenced, in our case, primarily by the mix of investments made by AMP Investments on behalf of the Platforms business. And you can see that in terms of the mix with the pie graph that we've showed there. In terms of cash flow and Platforms, continuing their positive momentum. As I mentioned, net cash flows, including pension payments, up over 56% compared to 1H 2023. We do see pension payments slightly higher in the half. That reflects the changes to the legislative minimum and also underlying the economic conditions. And also, again, reflects our slightly higher ratio of pension and super business across the platform. As mentioned earlier, that progress in terms of IFA flows continues to be positive, now making up more than a third of inflows in this half.
Turning now to the Super and Investments business, which we've previously called Master Trust. We've updated in terms of our descriptor. That continues its turnaround, with profit up over 21% in the half to AUD 34 million compared to 1H 2023. Net cash flows, excluding pensions, payments, continue to improve, with only a AUD 470 million outflow registered for the half. That's better than 50% improved over 1H 2023. Total costs within the business continue to be managed closely, and we continue to explore simplification options. But having said that, we will also continue to look at growth opportunities in this business as it continues its turnaround. And pleasingly, as I mentioned before, margins are stable and within our guidance in this business, reflecting the progress the team have made in terms of the simplification in prior periods.
We'll provide a little more detail on cash flow and superannuation investments just to provide more of that mix. The left-hand graph you can see highlights the general improvement in outflows in recent halves. As Lex mentioned, those retention efforts started to show through in terms of our offer to clients, improved returns, and generally improving sentiment. The graph on the right shows that improved cash flow, excluding pension payments, where we separate out those mandate losses, and you can see the positive trend that we're graphing there and looking to continue to repeat. Now turning to Advice, where losses for the half are trimmed to AUD 15 million, which is a significant improvement on 1H 2023. Revenue for the half was higher as a result of fair value gains in our equity portfolio. We continue to make cost savings, down 13% on 1H 2023.
All of that setting the platform for today's significant partnership announcement, which Lex has already backgrounded. Advisor sentiment continues to improve, as has the advisor average revenue. Again, we see those metrics as laying a very firm foundation for the very important partnership we've announced today and that transition for advisors into that new joint venture partnership with Entireti and also AZ NGA. Turning to New Zealand Wealth Management, which has delivered another strong result of AUD 17 million in PAT and Aussie dollar terms for the half, flat period-on-period. Pleasingly, they've continued to grow their other revenue by 15% compared to the first half of 2023, reflecting that growth in Advice and coaching revenues from the EnableMe acquisitions, Lex mentioned, as they continue to diversify revenue streams in that business.
We see inflationary pressures as being higher in New Zealand at present and generally conditions being tougher, but costs have been tightly managed and remain flat compared to 1H 2023. Now finally, turning to the Group segment, where revenue from partnerships is overall up slightly at AUD 37 million for the half. Most of that improvement has come from the recovery in our PCCP business, but China continues to improve also, particularly over the H2 result last year, where we talked to those regulatory changes that had created a dip relative to historical periods. Controllable costs at Group continue to trend down, improving 10% compared to 1H 2023. As I mentioned earlier, interest expense fell a little over 15%, reflecting that repayment of corporate debt. Similarly, though, investment income trended down as we see less cash being held as we continue our capital return and balance sheet management generally.
Overall, that delivers an NPAT underlying a AUD 7 million loss for the Group for the half. Now turning to costs, we've provided the traditional walk in terms of the 1H 2024 controllable costs by comparison, as we mentioned, down 6.4% to AUD 339 million. Critically, employee costs continue to benefit from the changes we made throughout last year and which we continue to drive into this year. We have seen some uplift in technology and property costs as we see the full effect of the stranded costs from those prior transaction activities in the prior year that we'd flagged, but we expect those to track down as our business simplification program fully delivers. The momentum we're seeing overall is in line with our overall FY 2024 cost plans as we've previously advised. Now just turning to those cost plans and the restatement as we think about the Advice transaction.
FY 2024 controllable cost guidance is being rebaselined for the full year in anticipation of completing the Advice transaction in H2 2023. That will effectively see us removing the direct revenue and direct cost associated with the Advice licensee business from our continuing operations for the full year. So that will see our controllable costs, excluding Advice, rebased to AUD 660 million for FY 2023, down from our original target of AUD 690 million. There are stranded costs over and above the cost savings we already had in play of around AUD 45 million that had emerged post the Advice completion. Much of that cost was already in our overall cost plans for FY 2025 as we sought the break-even performance of the Advice business unit. I'll talk a little more to that in a moment. We do see further cost savings in the Corporate Centre flowing through from our business simplification initiatives in H2.
That will offset the traditional seasonality you've seen in our H2 cost base, leaving us confident of meeting our rebased AUD 660 million controllable cost target for the full year, excluding the Advice business unit. Importantly, business simplification spend, as I noted earlier, will be at slightly softer in H1. We expect to ramp up in H2 as the projects fully mobilize, but it will be within our guidance of AUD 60 million-AUD 75 million pre-tax and within the envelope of the AUD 120 million-AUD 150 million over the full year 2024 and 2025 periods. Now just a pro forma of where we expect some of the key drivers around the Advice transaction to be. As mentioned, total consideration for the Advice business across the licensee and the equity stakes is expected to be around AUD 92 million.
As Lex mentioned, we expect to book a loss in the second half of around AUD 30 million as a result of the transaction, specifically legal transition costs, some of the specific separation activity and incentives for advisors, and also some provisioning for known issues. As I mentioned, we're rebasing that cost guidance for those direct costs down to AUD 660 million, and correspondingly for FY 2025, given our prior guidance of AUD 620 million-AUD 640 million, that correspondingly reduces to AUD 590 million-AUD 610 million for our controllable cost target in the FY 2025 year. As I mentioned, there are clear stranded costs that emerge as a result of the Advice separation. Some of those costs will come out through 2024. Some fall away as a direct result of completion of the transaction.
That leaves us remaining stranded costs, which are always part of our cost base and we're committed to addressing and will address within our existing business simplification budgeted spend, as previously guided. We see the capital implications for the transaction as being broadly neutral. There are some sort of ins and outs in there, but broadly, we see it as a neutral position as we currently look at the transaction. Now just briefly turning to capital and liquidity overall in terms of the 1H position as we finish. As Lex mentioned, we've returned AUD 963 million of our committed AUD 1.1 billion capital return in 1H 2023. We announced today's dividend, which is a further approximately AUD 52 million of capital to be returned next month. That will leave us AUD 85 million remaining in the transfer buyback to complete that capital return and complete the capital program.
In the half, we did continue to pay down corporate debt as we'd advised, broadly halving the outstandings over the first half of 2023 as we continue our overall capital management. And similarly, Group cash continues to trend towards normalized levels as we complete those capital management initiatives. That sees Group surplus capital for the half close at AUD 676 million, as displayed in that table with the detail as you can see. As is customary, we've also provided a waterfall to track the FY 2023 capital and key movements through the half year. We saw total capital requirements, including the board buffer fall by just under AUD 70 million-AUD 1.892 billion for the half. That's primarily a result of the smaller bank balance sheet.
You can see the NPAT of profit in the half, our planned buybacks, and also the previously announced Bank Tier 2 redemption earlier in the half, culminating in that overall surplus position as we see at AUD 676 million. Now just briefly for me in terms of guidance, a quick recheck in terms of comparisons. Our guidance for H2 remains largely unchanged from our full year announcement. Bank Platforms and our Super, Investment businesses are expected to perform as guided, particularly around margin. Our controllable cost guidance is now updated to AUD 660 million, accounting for that removal of Advice that we anticipate in the second half, and we remain confident of meeting that target. Our business simplification investments, we do expect to ramp up in H2, but as I mentioned, will be inside our guided envelope of AUD 60 million-AUD 75 million for the full year.
We are expecting the strategic partnerships to continue to perform broadly at a 10% return on investment through the cycle, and you're seeing that improvement as we track the first half. I now hand back to Lex to summarize.
Thanks very much, Blair. Let me just spend a few moments talking about what we anticipate to be the priorities for the second half of this year. Firstly, if I turn to our Bank, should be no surprises here. We intend to soft launch our smaller micro business and consumer Bank in the fourth quarter to friends and family and publicly in the first half of next year, in fact, in the first quarter of next year.
Recently, Engine by Starling, which is the platform that we're embedding into Australia, was supportive of a new bank that launched in Romania, and that scaled and performed very well, which gives us additional comfort that we'll be able to do the same in Australia. Undoubtedly, the market in Australia remains competitive, but we still believe there is an opportunity in this small and micro businesses area. In Platforms, it's continuation of the good work that that team has been doing. We're starting to see momentum build with our innovative retirement solutions. We've now over 250 active advisors in that space, and we have AUM approaching AUD 300 million. We want to continue to innovate in the space of retirement because we see huge amounts of money migrating into that area over the next 20 years.
In our Super and Investments business, clearly the retention efforts have been starting to pay off, but I think there's more we can do here. We're now in a position where we have offerings with strong performance, we have the competitive insurance, we have a good proposition in terms of price and service, and we have an improving AMP reputation. And all of those things affect this business. We're now starting to drive into that direct-to-consumer space, and we're able to start to activate some of the corporate super opportunities that we haven't spoken to before. And on top of that, we're hoping in the first half of next year to launch an innovative new retirement offering for our default super customers. I think I'm very excited about some of the things we're doing there.
In our Advice business, clearly the focus needs to be making sure we have a smooth transition of the transaction for our advisors, making sure we provide clarity for our people in terms of their positioning and completing the deal. We're hoping that all of that will occur by the end of this calendar year. The regulatory environment in relation to Advice is certainly more benign, and there's lots of opportunities out there for advisors, and we want to make sure we can continue to support those directly through our minority interest in AZ NGA, but of course through our North platform also. In New Zealand, the business continues to perform there despite the economic environment. The recent EnableMe acquisition will continue to be focused on to broaden that financial coaching to help people really set themselves up for a better retirement.
We are growing our corporate super base, albeit a slightly different environment to that of Australia. In our strategic partnerships, as Blair mentioned, there was a drop in our asset under management in our pension company last year as a result of the regulatory change that has already been recovered. There is optimism about the pension system in China. It continues to be a focus of the government and continues to be a growth area for us. In our asset management company, again, it's performing well and we'll continue to see growth there. Our focus in terms of the partnerships is making sure we support them through the growth periods of the pension reforms and also to focus on adequate dividend payouts. If I summarize the first half year result, I think we continue to deliver on the promises.
We are improving the financials, maintaining the margins, growing the inflows. We're focused and are delivering on those costs. We're almost complete the AUD 1.1 billion capital return that we promised to the market. And we're starting to see improving flows in our Platforms and superannuation business, along with stabilizing the company and including the balance sheet. I think we're now in a position of much greater strength with the announcement of the transaction today and really are able to focus on the next phase for AMP, which is about growth. So thank you very much. And on that note, I'll go to you, Maggie, for questions.
Thank you very much. We will now conduct the question- and- answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.
Please stand by as we compile the Q&A roster. Our first question comes from Nigel Pittaway from Citi. Please go ahead.
Good morning, guys. Thanks for taking my questions. Just first of all, on the controllable costs, I mean, you did say you're well on track for target, and I do hear what you said about seasonality of the cost base before, but your guidance does envisage a 4% increase in controllable costs in the second half. So I was just intrigued as to why you're expecting that level of increase given the initiatives that you've got in place.
Thank you. I'll let Blair answer that one, Nigel.
Hi, Nigel. Thank you. We've always seen second half seasonality increases if you look back across our periods.
That's largely a function of the roll forward of salary changes that occur in the first half, as well as some seasonality in terms of marketing spend. Obviously, the increase that we see in the second half, I think, is much more moderate than previously. From my point of view, that's in line with the trend we've seen. What I would say is there's also continues to be some opportunities to drive that growth, so particularly the Platforms business. As I mentioned, that cost is flat. The Super and Investment business, we're seeing some momentum. There are some small investments that we're making to continue to shift to that growth footing that we'd like to see.
I think that's probably a bit of a timing, some of the spend around projects as well, Nigel. At this point, we would see there being an uplift in the second half.
Okay, thank you. And then just maybe a question on the Bank. I mean, you said that the growth should pick up second half, and you've maybe seen a little bit already. I mean, why do you think that will be able to pick up in second half? And are you prepared to sort of dial down the margin at the NIM a little bit in order to achieve that?
Yeah, thank you for that question. I mean, you can see in the first half, we've certainly been biased towards margin, and that's why the volume has seen that reduction. While the market remains competitive, there certainly are pockets that we're seeing we can grow in at the right margin. That's around the self-employed people not going up the risk curve much, some of the self-managed super funds, et cetera.
So there's some pockets that we've been able to leverage to improve the margin basis, which is why we can have some confidence that volumes will pick up. And that's certainly what we've seen in the last couple of months. But certainly our bias.
Yeah, okay. Thank you. And then maybe just finally, just on the, I mean, the PCCP thing was interesting. I mean, you got the write-down last time, right back up this time, which does seem to be slightly surprising given the market conditions in terms of office property and the like. So can you just explain how those values managed to improve in this period?
Yeah, the improvement was in our seed investment. PCCP is not only in office, it's in a broad range of developments.
So yes, there is some office exposure, but in terms of our seed investment, it is much broader of that into industrial and commercial, and that has picked up more than the office.
Okay, thank you very much.
Thank you, Nigel.
Our next question comes from Lafitani Sotiriou from MST Financial. Please go ahead.
Good morning, guys. My first question is around the improved flows you're getting on North and the traction you're getting with the IFA network. Can you just talk to some specifics as to what's changed? What are you doing differently to penetrate that user base? And does the new partnership you're forming help accelerate that?
Yeah, thanks, Laf. That's a great question. Firstly, in terms of the improving flows, and you've probably heard me say that before, but it was really important for us to launch something different about North and about AMP.
We went through a lot of work to decide that the retirement space and the innovation we launched around the retirement space was really important for our North platform. Not just for the flows that we could get into retirement, but because we've not been in that external or IFA market for a while. It allowed us to open the doors to new relationships. You're starting to see some of the benefits of that today. We need to continue to do that. That's why we talk about the flows from IFAs. I'm not saying the flows from ours alone aren't important. They clearly are, and they're a very important partner. But we know the market's changing, and IFAs are growing. That's the main reason for that.
Yes, the announcement today with Entireti and with the dealer Group that they own is a real opportunity for us. And we're starting to talk to them about opportunities for North across their network. So absolutely think there is some opportunity for us, and the teams are working together.
Okay, thanks. Just moving to the excess capital bucket, and I appreciate the extra line with the DTAs to help sort of clarify what is, I guess, usable more immediately. But could you just talk us through, as you get to the end of this capital return program, philosophically into the next couple of years, there's still that bucket of capital, excess capital that will come through, and you will have sustainable earnings there. How should we think about into the future the capital return mix?
Would you envisage possibly there still being buybacks and dividends, or what are your, I guess, earlier views on what that excess capital bucket will be used for?
Yeah, thanks, Laf. I mean, I think we want to get to the situation where we're in a more, I suppose, business-as-usual type capital management position, which is why we want to move to a more formal dividend policy. As you quite rightly note, we expect to finish that AUD 1.1 billion in the buyback by the end of the year. We'll come to the market with a formal dividend policy by the end of the year as well to move into that phase. I'm not saying we wouldn't ever buy back because it's not in our interest to have surplus capital sitting on our balance sheet, but it's not something that we're anticipating in the short term.
Sorry, just to clarify, but there's still AUD 500 million + excess capital, even net of your current program, and you'll have organic earnings generation next year. Is there any thought on what may happen with that AUD 500 million bucket? There's no discussion or consideration.
Yeah. We've still got a few movements in the capital stack and across the balance sheet over the next six months as we finalize this transaction and deal with some other items. We've got the buyback continuing until the end of the year. The board and I will have another look at capital as we come up to the end of the financial year because, as I mentioned before, not in our interest to hold surplus capital. But I do want to make sure that we start to move into a more, I suppose, orderly capital management process and focus on growth.
So we'll have another look at that as we come up to the annual results. But at this point, we're not planning a secondary buyback.
Yeah, I got it. And so can I just circle back on the simplification of the Super and Investments platform? Can you just add a little bit of color around where is the consideration at for, are you possibly going to replatform it? Are we talking within the next year you'll come back to market with a decision you've made, or is it years away, or how should we think about it?
Yeah, you're right. At a point in time, we've probably modernized most of the technologies that we're using across the businesses. The area where we do need to focus on that modernization of the technology stack is in the superannuation space, and we've been looking at that.
Anything we did do there, though, would be within the envelopes that we've already committed to the market.
Okay, great. And just one final very quick question. Historically, there was a potential to earn performance fee from the asset sale to DigitalBridge. There was up to AUD 180 million. I think most people have just written it off. And are you able to add any color as to is there still potential in earning any of that performance fee? Is there any timeline we can expect, or should we just assume nothing there?
Yeah, good question, Laf. I mean, always optimistic about booking some of those fees, but we certainly haven't taken them into account in the result. Some of those will emerge through 2025 and 2026 if they're actually to realize.
But at this point, we haven't put them into our projections, and we'll update the market as we get closer. But I'd like to think some of that will be realized. What amounts? I'm not quite sure.
Some of it may be realized.
Yeah, I would expect it would be positive that some of that will be realized. Actually giving you a dollar amount today, I think, would be a bit silly.
All right, thank you.
Thanks, Laf.
Thank you. Our next question comes from the line of Simon Fitzgerald from Jefferies. Please go ahead.
Hi there. Just one quick question about the AZ NGA network. You talked about opportunities for No rth. Do you know, do they use a competitor platform at this point in time and whether there's a transition opportunity there?
Yeah, they use several platforms, is my understanding. I think they have an open platform.
And so obviously, we think that's a real opportunity for it.
Great. Okay. And then just I'd like a bit of a breakdown just in terms of how we get to the AUD 30 million accounting loss on the sale. Is it just that it's the holding, the carrying value is above the AUD 82.2 million, or was that written off? And also, is there any sort of update on whether that includes some of those written down or impaired registers through the BOLR facilities that are on the balance sheet as well?
I'll let Blair walk you through the loss. In terms of the BOLR situation, obviously, we've taken the BOLR class action into account already in our balance sheet, and we don't have any other BOLRs. There might be one that's still on board, but they're pretty much complete, Simon.
Yeah.
Yeah. Simon.
So certainly, the BOLR remains on our account, and so that's already been dealt with. The AUD 30 million loss broadly reflects the fact that we've got a licensee business where there's about a AUD 10 million consideration. So setting aside the equity portfolio, there's about a AUD 10 million consideration coming through. We have some specific legal and transaction costs, obviously, associated with the transaction. There are some specific separation costs and also some incentives that we're providing to the advisor community, some rebranding, some other things that I've got to do because we want to make sure that there's a very smooth transition for advisors and so they can continue to focus on clients and growth business. And we've also taken a conservative view on some small provisions associated with known issues that are in the book because obviously, they're on our account, and so we've accounted for those.
That's what drives essentially our assessment at this stage of about AUD 30 million loss on sale.
Okay. And then just one final question on the Bank in terms of the arrears tick up that you've seen there. Are there any trends that you can identify, particular states in general, any vintages, any LVR categories?
No, there's nothing I mean particular. There is an uptick across the book once someone rolls off the fixed onto the variable. That tends to cure over six months or not. So that's certainly one of the areas we're looking at. But in terms of OO or IO, no, it is across the book. And as you can see, in terms of the repayments, if you're quite a way ahead, you're doing really well. If you're in arrears or just on time, that's where they're struggling.
I mean, I think, as any banker would say, things look pretty benign despite the environment, and we're just all watching those unemployment numbers.
All right. Thank you for taking my questions.
Thank you.
Thanks, Simon.
Thank you. Our next question comes from the line of Benjamin Moss from Macquarie. Please go ahead.
Good morning. Thanks for taking my questions. First off, how should we.
Good morning. Nice to have a new voice.
Oh, thank you very much. Thank you. First off, how should we be thinking about the timing and priority of further paydowns and debts and perhaps the return of capital going forward?
Yeah, I'll let Blair answer that one. Thank you, Benjamin.
Yeah, we obviously have debt maturity very late in the half, which we paid down, which we've played.
Broadly speaking, in terms of the debt we're carrying, we think that's a pretty neutral position now in terms of what our requirements are. So we don't necessarily see more paydown. There's nothing particularly due in the next period. In fact, the next maturity is actually out late 2025. And so we're pretty comfortable with that. We're obviously monitoring carefully that position, but right now, we're pretty neutral in terms of where we are now.
Fantastic. Thank you. That's helpful. Just lastly from me, on the cost-out program, as we go into the second half, which division will benefit the most from that?
Yeah, great question. Obviously, we would see Corporate Centre being the particular area where we would see the most cost-out. That's where we're sort of, for want of a better word, housing the stranded costs.
And so that's the real focus now in terms of as we ramp up our business simplification program. So that's the key one. I would expect, obviously, that that's because that's where we're going to see the remainder of the balance of the Advice stranded cost emerge. It'll mostly be centered on that Corporate Centre which clearly is a big focus for us in terms of right-sizing the total corporate entity, which we're now very clearly focused on.
Okay. Thank you. That's it from me.
Thank you.
Thank you.
Thank you. Our next question comes from Andrei Stadnik from Morgan Stanley. Please go ahead.
Good morning. Can I ask my first question on the retirement income strategy? You're saying you're going to adapt the retirement income product for the old Master Trust and your Super and Investments. What kind of, what kind of adaptation do you need to do?
What kind of work is required? How different will the product be? And what kind of uptake, what kind of success do you expect with this product?
Well, I don't want to expose all our secrets, Andrei, because it's really important. No, it is really important for us to launch that appropriately next year. But it will clearly be a simplified version of what we've done in the platform space. We've been working really hard on that, probably for about nine months today, engaging with regulators and with Treasury. And we'll launch that next year. And it will affect quite a large portion of our superannuation or default superannuation space. I probably don't want to go into a lot more detail now because probably a lot of competitors would love to hear what we were doing there.
Understood. Thank you.
From my second question, can I ask around the Bank funding cost dynamics? What are the opportunities to explore better outcomes on deposits, particularly cold deposits? And then on the other hand, are you expecting further pickup in your replicating portfolio?
Yeah. A couple of questions there. Firstly, we don't have a replicating portfolio, really, but there's slight pickup there. In terms of the funding cost, which is the big one for us, that's something we've been looking at for a couple of years. And the reality is we don't have a transaction banking capability. So as a result of that, we don't get very much low-cost funding. So it's that call in term deposits. And that was really the reason that we had to start looking at alternative strategies and the launch of the small and micro bank, which will come out in the first quarter of next year.
And that strategy was all about diversification of the funding and diversification of the customer base. Did you want to say anything else on the replicating?
No, I think we have flagged previously. There's a material deficit for us in terms of that low-cost funding. We see most competitors with upwards of 25% of their funding mixes in those products, and we simply don't possess any of that. So the launch next year, as Lex said, can't be understated in terms of its importance. We obviously see that starting to deliver benefits in really 2027, but mostly 2027. So it is about growing that. So that, I think, is the key for our funding mix overall, a critical strategic initiative for us.
Thank you.
Thank you. Our next question we have Siddharth Parameswaran from JP Morgan. Please go ahead.
Good morning, Alexis. Good morning, Blair.
A couple of questions, if I can. Firstly, just on the variable costs. They fell reasonably sharply in the past half, AUD 149 million. I think it was around AUD 160 million the preceding halves. Just keen to understand whether that is a new base. And if you could just give us some idea of what actually drove that. I think a lot of it seems to be in Master Trust, but I was hoping you could just provide us some context to what happened here and sustainability of that going forward.
Yeah. I think a lot of that is to do with simplification of the Platforms and Super and Investments business and removing some of the older products and some of the older investment management fees. Blair, did you want to say anything else?
Yeah. Product mix and predominantly investment management expenses.
And so we do see that being more in line with our go-forward view.
Okay. Thank you for that. Okay. The second question, if I can, just to ask on the Bank and these new initiatives on the SME side. I was just wondering, is there any implications on costs of this going forward? It doesn't seem like you're guiding to anything, but usually, if you're starting something, there should be some investment made. I was just wondering if you could tell us how you're thinking about this and really what should be the impacts we should be thinking in 2025.
Yeah. Through 2024 and 2025, the costs of that have been included into our simplification program because at the same time, we're able to take out some of the legacy IT architecture. So that's why you don't see it necessarily coming through separately.
Some of those costs have been borne by the Bank as it's been looking to target its operating costs. So through 2024 and 2025, really, it's being absorbed as part of either BAU or the simplification program if it's removing complex IT.
Okay. Okay. Fair enough. Okay. And I presume it's too early to really have any NPAT on NIMs in 2025.
Yeah. We'll launch in the first quarter. We'll start to see the success of that through the year and be able to reforecast that.
Thank you. Our next question will come from the line of Scott Russell from UBS.
Morning, Scott.
Morning, Alexis. Morning, Blair. A few questions on Advice, if I can, please.
I'm interested in what the pro forma position looks like and maybe talking about FY 2025 is a bit premature, but I guess what I'm trying to understand, and it may be not clear from the materials, is what exposure AMP has left to its Advice segment after these transactions. We used to talk about a break-even on FY 2024. I guess that's null and irrelevant now. But you will still have some exposure here. I'm just trying to put together some of these numbers.
Yeah. There's a couple of things. Firstly, we will, of course, maintain our intrafund and salaried Advice, which is part of the proposition within Super, but that's always been carried in Super. So I just want to make that clear that that's there. In terms of the ongoing exposure to Advice, let's assume for the moment that the deal is complete at the end of the year.
We'll have that 30% stake in the licensee business, so we'll still have that exposure. We've been open about the fact that as the financials are bedded down in the new environment, we will transfer an additional 10% to the advisors over that first two period, over that first period. So other than the known liabilities around our class action that we have, and that impacts several of the Advice, the various class actions that impact several of the Advice businesses, we have that exposure, which, of course, will continue a couple of small remediations that we need to finish in the current year, and then the normal warranties and indemnities that would come with any transaction.
Okay.
If I just look at some numbers from the last 12 months' Advice P&L, AUD 110 million of controllable costs on AUD 55 million of revenues, and you're calling out AUD 30 million of those costs will be exited alongside AUD 30 million of revenues. That sort of takes the P&L down to AUD 80 million of costs on AUD 25 million of revenues, which is still a significant loss. I think you've said that AUD 60 million of the costs are targeted for cost out in FY 2025. Does that bring you down to what you would imagine to be an FY 2025 neutral P&L?
Yeah. Good question, Scott. I'll let Blair work through that for you.
Yes. Yeah. Broadly, we would be aiming to get that neutral position, Scott. Those stranded costs absolutely remain with us, obviously, and remain in our remit to address.
They were always part of our business simplification, targeted investment, and the overall cost guidance. So obviously, because obviously getting to break-even was a core part of that commitment to the overall cost guidance envelope through 2024 and 2025. So we remain focused on that. What I would observe is, obviously, having this transaction to essentially architect the separation against allows us to accelerate that separation of the Advice business and then more diligently address that stranded cost, which is obviously work that literally starts from tomorrow. And so we'll be continuing to work on that through FY 2025.
I think it's also important to note that we had taken some further restructuring and Advice in the first half. The benefits of that wouldn't have flowed through to the second half either. So you've got some extra things that we were doing that will flow through.
Your question is quite right. There were additional costs to take out of the other areas that we need to address and always knew had to address as part of the simplification.
Okay. Okay. That's clearer. Thank you. Maybe just on flows and the possible disruption caused by the transactions by the end of this year, are there any guarantees from the buyer on keeping client money on AMP Platforms? Or what do you see as the risk of outflow as a result of the divestments?
Of course, no, there are no guarantees. That would not be possible in today's world. I mean, I think the fact that Matt Lawler, firstly, will be the CEO of the new entity, so that creates great continuity.
He and I have been working really hard with all of the Advice practices over the last year, bringing on the journey of what new could look like. We've put in place today what they're aware of that. We've also put in place some rebates to make sure that the transaction is smooth and easy. Those rebates will apply for the first year and the second year, the fees they pay to the licensee, and will be rebated at the end of the two years, either in cash or equity. So we've done a lot of hard work in making this as easy as possible for advisors in making sure they've been involved in the decision and making sure we continue to invest in North. So I'm not saying there won't be any exposure.
Clearly, it's a concern for me, but I think we've done everything we can to protect the business and make sure we can keep investing in the business. And that's what the advisors want us to do as well, just keep investing in North.
And Scott, just for clarity, that those incentives that Lex talked about are part of that envelope of transition costs, which is why we're booking that AUD 30 million loss on sale.
Got it. Thanks, guys. I'll leave it there. Cheers.
Thank you.
Thank you very much, Scott.
Thank you.
Yeah, I think there's a couple more questions.
Yes, there are two more questions. Our next question comes from Lafatani Soteriou from MST Financial.
Thank you, Laf.
Hey, guys, just one follow-up question from me.
Just in relation to the Bank, and there's talk of potentially reaccelerating some growth or some of the parts of the market, there is some opportunity for you to grow the book. How should we think about, I guess, the guardrails for overall return on capital within this business? Because you're currently, even though even if it is steady, you're still not good enough to meet your cost of capital. And so are you still going to grow your book if the cost of capital, sorry, your return on capital is still around 6%? Or what's the thinking internally around when to pull the trigger to grow the book and what hurdles you have to hit?
Yeah, thanks, Laf. Clearly, our bias is towards margin and return on capital, and I just want to be really clear about that, which is why you've seen the reduction in the book.
Yes, we are expecting some moderate growth, and I want to stress moderate growth in the second half in those pockets I outlined before, but I would expect that you would see flattish NIM and flattish return on capital through the second half. We really need to focus on diversification of the funding and the pull of clients to significantly improve that in the current environment.
But should you be growing anything that's returning 6% return on capital below your cost of capital, even at a small rate? I was just trying to understand the reasoning for it.
Yeah. It's a fair question. And as I said, it's moderate growth, and it's in those pockets where we think the return on capital is better than the base return on capital. So we're not talking about outshooting the market here by 2x. We are seriously talking about very moderate growth.
Okay. Got it.
Thank you.
Thanks, Laf.
Our last question comes from the line of Siddharth Parameswaran from JP Morgan.
Sorry, I got dropped off. Sorry, I got dropped off earlier. Just a question around the revenue margins. I don't know if that question came through last time, but I just asked about the fact that there was some pressure that we saw in the platform division. Just I think the other fees, the non-admin side, I think there was some pressure there. I was just wondering if you could comment on whether that would be expected to continue going forward. We've seen it for the last two halves. And also, just on the other side, on the Master Trust revenues, there was a big bounce in the investment income line.
I was just wondering if you could comment on whether that AUD 7 million is likely to continue at those levels.
Yeah. I'll let Blair talk about this, and in terms of the Platforms, we wanted to provide a bit more disclosure today about the platform fee and the composition being both admin and investment management. Because, look, it's a competitive environment, but there's greater pressure on the admin side than the investment management side. And you can see for us that it's about a 50/50 split in that. So we've maintained reasonable margins, dropping the basis point of about one over the last period of time.
We're going into flat for the end of the year. Haven't started to think about what that may look like through 2025, but that's why we're wanting to give you an indication that our composition of margin is a little different to some of our competitors, and so therefore not as stressed as maybe others may be.
Maybe, so just on the investment income and Super and Investments, there are some timing differences in terms of cash holdings that sat within that entity and in terms of when we pushed dividends up to Group. So some of that earning is on that cash in that entity, and there was a bit of difference between period on period. So that's what accounts for that movement you've seen.
Sorry. So what's the go forward basis? What should we think of as a normal number?
The go forward would be slightly down on what you see there. So trending more towards looking at it would be 3-4 rather than 7.5.
Okay.
And obviously the big one. Yeah.
Thank you.
Thank you.
Thanks.
Thank you. This concludes the Q&A session. I will now hand back to Alexis.
Yes. Thank you all for your attention today. I think it is a really important day for AMP, and I'm certainly not naive enough to believe it's not a big day when we announced that we are taking a minority rather than the whole ownership of AMP Advice. I think this is transformational for the industry. It's certainly transformational for advisors and very much looking forward to the next era of our company. So thank you very much, and I hope you have a great day. Thank you.
This concludes today's conference call. Thank you all for participating. You may now disconnect.