Good day, and thank you for standing by. Welcome to AMP's Full Year 2025 results conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I'd like to hand the conference over to our first speaker today, Alexis George, Chief Executive Officer of AMP. Please go ahead.
Yes, thank you very much, and welcome to the full year results for AMP. Before we start proceedings today, I would like to acknowledge the traditional custodians of the land in which we're holding this meeting, which for us is the Gadigal people of the Eora Nation, and pay my respects to elders past and present. Of course, today I am joined by our CFO, Blair Vernon. Before starting proceedings today, I would like to acknowledge the negative reaction to the results, but I believe these are credible results. We've delivered what we said we would, and we want to give you some color on that today. If I look at the agenda, I firstly want to take you through an overview of the results together with achievements and deliverables of 2025.
Then I'll allow Blair to walk through the individual business unit performances, what we've done around cost management, capital management, and of course guidance. They will then have ample time for Q&A. So if I look at where AMP is today, I think we're in a strong position to enter the next era of truly positioning us for growth and owning that space of retirement. We got to this point through sheer hard work over the last five years. We've simplified the portfolio, strengthened the balance sheet, and returned AUD 1.1 billion of capital to shareholders and recommenced dividends. We've reset the cost base, and efficiency muscle is now well developed. We have a strong and talented team, as demonstrated by the internal succession, and we've resolved many of the legacy issues that we were dealt.
And on top of that, we've restored reputation to the highest level since 2008. In my mind, this execution now allows us to focus on growth and to make AMP that place that can help all Australians to have a dignified retirement. We are unique in having all the building blocks for making this happen. If we look at those starting out, we have digital banking. We have Simple Super, which has been added to by the release of Boost, which gives people the option for greater retirement incomes with no decisions. We have rewards to help people with everyday spending, and we're lucky enough to have a simple advisor menu grow on My North. If we move to the building wealth phase, we have all the investment options from managed accounts to managed funds.
We support all forms of advice: digital, intra-fund, and we are a vocal supporter of professional advice and the change it can have for individuals. We have lending both for individuals and micro-businesses. If we come to that pre-retirement phase, we have guarantees, which give certainty but also exposure to the market, as we know we're all living longer now. We've just introduced SMSF loans in our bank, and we're working on many more solutions. In retirement, I think it's fair to say we're the leader in terms of innovation here, where we have the full menu: account-based pensions, lifetime pensions, and all forms of advice. On top of that, we're dealing with the social aspects with our lifestyle app, Sitra.
When we come to the AMP strategy, from my perspective, it's simple: growth, innovation, and embracing change, whether it's new models, new tools, or new partnerships. On growth, we want to continue to support those loyal advisors who stood by us over many years. But on top of that, we now have the solutions, the service, the price, and the innovation to grow our new advisor base. We want to build that D2C capability utilizing our restored brand, and we want to grow AMP Bank Go deposits, which is part of the strategy to improve return on capital in our bank. On the innovation space, we want to build off lifetime solutions. We are unique in having that intersection of wealth and banking, and we want to use this to create new opportunities for our customers.
And in change, we are embracing AI. 95% of people are now using it on a daily basis, and we have over 400 agents deployed across the organization. But on top of that, we acknowledge we're a small company, and we use the expertise of partners to help embellish this. So let's look at the highlights of 2025. Our NPAT and EPS were both up greater than 20%: NPAT 21% and EPS 25%. Our cost base has been reset and the program complete. But it doesn't mean that we won't stop focusing on costs, and that's why we put CPI into our KPIs. The platform's cash flow was up 85% on last year at AUD 5.1 billion, and the S&I flows are improving too.
We launched Bank Go in February of 2025 and have AUD 310 million in deposits and more customers and transaction accounts than we expected. On top of this, we've resolved most of the legacy issues, including the last ones remaining from the Royal Commission. Of course, today we again announce a AUD 0.02 per share dividend at 20% franking. Diving a little deeper into each of the business units. In our platforms area, we've demonstrated strong momentum with growth in advisor numbers and licensees. Our innovation continues not just in managed portfolios, but our My North Interactive, which is the platform that helps advisor productivity, where we continue to pursue ideas to make advisors' lives easier so they can focus on their customers. The AI file note is a great example of this.
Also, our lifetime solutions are now showing great momentum and we're the only one in the market who has yet to launch a decumulation product. Pleasingly, the Acumen or ex-AMP advisors, despite now being completely separate from AMP, continue to support us. I think NMG recently said that we're in the top three platforms for advisor satisfaction and where their lead users were in the top two. If I move to our S&I business, cash flows are improving here too. We continue to have top quartile performance, good insurance, intra-fund advice, and we're expanding our digital advice journeys constantly, with over 30,000 users now going through those journeys helping to improve education with our customer base.
Also in 2025, we launched Lifetime Boost, which is the equivalent of Lifetime Solutions, and we'll put the income stream portion of that in the first half of this year. We put in an AMP Rewards program for our customers. If we come to the bank, it was a year of execution. In our traditional bank, we've continued the mantra of margin over volume, where we're focusing on higher margin, investor-only, and the 10-year interest only. We also recently launched the SMSF offering. We've had a renewed focus on balance sheet and particularly our risk-weighted asset management with the view of removing or reducing capital usage as new opportunities now arise in the market to address this.
On AMP Bank Go, as I said previously, we have AUD 310 million in deposits with new offerings of overdraft allowing us to focus on the mini-business sector in the last half of 2025. In New Zealand, the business just continues to deliver in a reasonably difficult economic environment. We've had good performance there in KiwiSaver, and the shift to supporting retirement through both advice and solutions is starting to demonstrate some benefits. The revenue diversification there does offer some protection for our business. So on that note, let me ask you to go through the details, Blair.
Thanks, Lex, and good morning, everyone. As Lex mentioned in her opening comments, underlying impact is up almost 21% to AUD 285 million for FY 2025. Revenue increased 2.8%, while pleasingly controllable costs fell almost 7% off the back of our business simplification program, which saw EBIT increase over 21% in the year. Earnings per share are up over 25%, and our cost to income fell more than 6% at the group level, noting our rebasing of this metric in recent disclosures. Return on equity at the group level continues to improve and is now reported at 8% for FY 2025. Turn to the reconciliation of strategy impact, where two key drivers have influenced this outcome.
Litigation and remediation-related costs of AUD 95 million for FY 2025 reflects the significant progress we've made in resolving legacy class action matters during the year and recoveries against prior remediation programs. Business simplification expenses for the year totaled AUD 50 million on a post-tax basis, in line with our previously announced business simplification program. This has resulted in strategy impact result for the year of AUD 133 million. Looking now at total AUM, which is up 9% to AUD 161.7 billion, with increases posted across all three of our wealth management operating units. While market movements have contributed positively in FY 2025, the significant increase in platforms' net cash flows stands out compared to prior years. Across our super investments in New Zealand businesses, we also continue to see improvements in cash flow trajectory.
Across our five reported business units in our group, we continue to see our strategy delivering results. These business unit results reflect the restatement of costs as advised to the market recently. Strong cash flows continue to drive momentum in platforms, as Lex mentioned, while consistent performance improvements underpin our super investments result. In AMP Bank, our existing bank division showed underlying improvement on prior year, while our AMP Bank Go division continues to scale. New Zealand wealth management continues to perform well, and the group operating unit is significantly influenced by the strong performance of our China partnerships and those rebased group costs. Turning now to the individual business units in a little more detail. Underlying impact for platforms is up over 9% in the year to AUD 106 million.
Average AUM is up almost 11% in the year, with the highlight being more than 85% improvement in net cash flows to over AUD 5.1 billion for the year. Cost to income fell over 3%, reflecting continued disciplined cost control against a backdrop of sustained investment in our platform business. Margins contracted during the year by two basis points on a net AUM basis, or three basis points at a gross level. This following slide breaks out the margin trend compared to prior periods. 58% of AUM on North generates investment-related fees on top of admin fees, although the shifting mix from managed funds to managed portfolios has seen margin compression through the year, similar to the experience in previous periods.
In addition to the mixed trend, AUM growth at a client level continues to intersect with tiered fee structures and fee caps. Year-on-year improvements in net cash flows are reflective of our growth strategy and partnership with advisors across the industry. We continue to grow the number of advisors who have material volume on North and extend new distribution agreements. Pleasingly, the cash flow dynamics for advisors with material volume on North also continue to improve, as highlighted at the bottom right of the slide. There remains a significant addressable market for North for new advisors, and that remains a particular focus for us in our growth plans for 2026. AUM mix is predominantly super and pension-oriented, again reflecting our clear focus on this segment of the market and aligned with our strategy.
In our superannuation investments business, NPAT is up almost 15% at AUD 62 million for FY 2025, predominantly as a result of average AUM increasing 7.7% in the year. Net cash outflows almost halved in the year to AUD 542 million, reflecting our continued progress in this business. Cost to income continues to improve, down almost 5%, noting that rebasing of cost allocations as previously disclosed. Margins on a net basis are steady at 48 basis points. Gross margins are down one basis point for the year, although this was matched by reduced IMEs, broadly delivering that net margin stability, as I mentioned. Admin margin compression is a function of continued AUM growth against fee structure and caps, analogous to our platform's experience. Overall fund composition is largely unchanged year-on-year, although the underlying investment choices have delivered that IME compression.
S&I cash outflows at AUD 542 million compare favorably to prior years, and we maintain our ambition to reach positive net cash flows in FY 2026. A number of initiatives targeting retention and new member acquisition were delivered throughout 2025 by the team and are anticipated to underpin the continuation of our result improvement across the S&I business unit this coming year. Turning now to bank, where underlying impact for AMP Bank on a combined basis was AUD 55 million for FY 2025. NIM improved by two basis points year-on-year, while our mortgage book growth was below system at 3.8%, consistent with our strategy. Return on capital for the combined bank was down 40 basis points, which reflects the impact of delivering and beginning to scale AMP Bank Go.
AMP Bank Go delivered improved return on capital and cost-to-income metrics in FY 2025, as highlighted in the middle panel of this slide. AMP Bank Go was successfully launched during 2025, and the launch and run costs began to emerge, as reflected in the bottom panel of this slide, consistent with our strategy and previous guidance to market. The launch of AMP Bank Go was a key plank in our retail funding diversification strategy, as we seek to improve NIM over time, specifically by growing transaction account balances. During FY 2025, we continued to adjust the composition of funding overall for AMP Bank. This saw additional utilization of securitization off the back of favorable market conditions. Deposit funding mix was influenced by the planned run-off of rate-sensitive term deposits.
Both our deposit and wholesale funding decisions added positively to NIM, while the bias towards further wholesale funding to achieve capital relief had some downward impact on NIM, together with the redemption of our remaining AT1 capital notes. Those funding mix decisions have been an important ingredient in our continued focus on capital consumption across our banking business in particular. We continue to see a reduction in risk-weighted assets relative to our mortgage book, allowing capital release back to the group. As noted earlier, the AT1 reforms and issuance of Tier 2 capital have impacted NIM during the year. However, this is a one-off change. Credit portfolio metrics and composition remained positive, with our strategic focus on investors and interest-only options showing positive trends in the portfolio breakdown table on this slide.
We continue to see improvements in arrears rates over prior year, while bad debts and LMI remain nominal. 64% of borrowers are more than one month ahead in payments, up from 60% in FY 2024. New Zealand wealth management reported an impact of AUD 39 million, which is up over 5% year-on-year, against a backdrop of modest reduction in total revenue, which was partly impacted by New Zealand dollar weakness. Net cash flows improved over prior year despite difficult economic conditions persisting in the New Zealand economy. Overall, cost performance continues to be a strength of New Zealand business, with a broadly flat cost to income ratio. The group result of AUD 23 million underlying impact is significantly influenced by the previously announced rebasing of costs across our business units.
Controllable costs attributed to the group were AUD 70 million for the FY 2025 year. Equally significant is the continued improvement in our partnership performance, up over 15% for the year. Our China partnerships combined delivered more than 53% improvement to AUD 72 million for the year. Offsetting that improvement is a reduction in our other partnerships as a result of more normalized property valuations in our U.S. property fund when compared to the one-off benefit experienced in FY 2024. Given the significance of our partnerships in China, we have summarized again on this slide some of the key drivers underpinning the performance of China Life Pension Company, or CLPC. CLPC is the preeminent pension company in China, managing over AUD 440 billion of assets in Australian dollar terms.
CLPC has a commanding position in the Pillar Two segment of the three-pillar pension system operating in China. The pillar three opportunity remains significant, as the pilot phase across 4 provinces is expected to expand to all provinces during 2026, something CLPC has proactively positioned itself for. As noted at the half-year, we saw an increased dividend payout ratio of 35% from CLPC and remain focused on ongoing dividend payout performance. Across the balance of our partnership stakes, China Life AMP Asset Management, or CLAMP, delivered its first dividend in 2025, which is a key milestone in this partnership performance. PCCP continues to deliver steady performance. However, as previously noted, we do not see exposure to a property investment business in the U.S. as core to our growth strategy for the group.
A nd we will continue to explore divestment options at the appropriate time. We continue to pursue realization of carry related to the former AMP Capital business, and a recent sale by DigitalBridge may create potential for carry. However, at this stage, it remains subject to a range of conditions. Our business simplification program has continued to deliver against the commitments we made to address the cost base of AMP over the past two performance years. Controllable costs reduced almost 7% during FY 2025, with reductions noted across all of the categories and workstreams in this program. Our closing costs of AUD 603 million reflect the absorption of AUD 5 million of controllable costs associated with AMP Bank Go as we launched this business to market.
Now turning to capital. Group CET1 capital has increased 4.5% during the year against a capital requirement falling by over 4%. This collectively sees our CET1 surplus capital position at year-end improved to AUD 287 million. Allowing for the AUD 0.02 per share dividend, which Lex has discussed earlier, this delivers a FY 2025 pro forma capital surplus of AUD 236 million for the group. Deferred tax assets were consumed during the year in line with our strategy and business performance, and we retired our group credit facilities given the positive cash and liquidity position now established across the business. FY 2025 has seen capital generation as a result of our continued improvement in business performance, and we aim to continue to actively manage capital efficiency, with a particular focus on improvements across AMP Bank in the coming year.
We continue to assess the range of inorganic opportunities for scale or capability that are emerging across the wealth segment, which influences our immediate perspective on further capital management. Today's announcement of a AUD 0.02 per share final dividend brings FY 2025 dividends to AUD 0.04 per share, and we anticipate consistency in this dividend approach through FY 2026 and FY 2027, noting our limited franking credit balances. In the absence of a compelling alternative use of capital, our preferred method of capital return to shareholders beyond our current dividend approach would be via on-market buyback. Now turning to guidance for the FY 2026 year. Subject to market conditions, we expect margins in our platforms business to be 40-41 basis points and 60-61 basis points for our super investments business.
In AMP Bank, we are targeting deposit balances of AUD 1 billion in FY 2026 for AMP Bank Go and expect NIM in the range of 125-130 basis points. Partnerships are anticipated to deliver 10% per annum return over the medium term, and controllable costs, as previously advised, are expected in the range of AUD 630-640 million FY 2026. Finally, our business simplification program remains on target to complete during FY 2026 with a further AUD 20 million of investment. I'll now hand back to Lex to summarize.
Thanks, Blair. If we look to the year ahead, what do we see and what are our priorities? We still are an industry where there are tailwinds. We have an aging population. We're living longer, and the certainty of income remains an issue. We know that wealth and the home are the main two assets that Australians have, and we're lucky and uniquely placed in having exposure to both of these. We remain a player in a growing but changing market, and over the last years, I believe we've shown that we're both agile and able to execute on our strategy. So in 2026, what are our priorities? Growth. Organic first, but we have to have flows with a real focus on direct-to-consumer.
We want to continue to grow that supportive advisor base, and we want to focus on the deposits in AMP Bank Go. From an innovation perspective, we want to continue on the journey that we've demonstrated in retirement. We know that Australians need income solutions, and we think we're best placed to deliver those. We want to focus on advisor efficiency, as we've been doing, enabling them to focus and grow their customer base. And we know the next years will be change. That's inevitable. We want to leverage what we've built with AI. As I said, 95% of staff are using it, and we're now starting to deploy agents across the organization. But we want to use our partners wisely because they have skills that we, as a small company, cannot hope to build.
And on top of that, we want to continue to help the JVs experience the growth they've done so to date. So AMP is in the next chapter. We have repositioned the business and returned capital to shareholders. We have restored our reputation to the highest level since 2008. We've resolved most of the legacy matters, including those from the Royal Commission, and we're leading in retirement innovation. Our platforms business is demonstrating strong growth, and the S&I business is turning around. New Zealand continues to perform, and the bank is doing what we've asked of it, focusing on return on capital. So we are demonstrating strong growth. I believe we've got a great team in play and that we're ready to be able to deliver on the achievements of the last year. So on that note, I'll ask the operator for questions.
To ask a question now, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. There may be a short pause. While we compile the Q&A roster, once again, that's star one and one on your telephone keypad. We will now take our first question from the line of Julian Braganza from Goldman Sachs. Your line is open, Julian. Please ask your question.
Good morning, guys. Just a first question from me. Just on the China partnerships, obviously, it was very, very strong over the second-half period at about AUD 45 million. Can you maybe just touch on if there were any one-off impacts in that number that led to the strong growth? And also, alternatively, should we be expecting continued growth from these levels into 2026? Thanks.
Yeah. Thanks for that question, Julian. There were no particular one-offs in the year. We're just seeing strong growth in that Pillar Two and also the emergence of the Pillar Three. I mean, there is continued government support for personal savings in China, so we are expecting the growth of 10% through the cycle to continue. And obviously, we remain pretty optimistic about that investment.
Okay. Got it. That's clear. And then maybe just in terms of the bank, if you could maybe just touch on the moving parts in the NIM from second-half 2025 going into FY 2026, just how you're thinking about it, and also just the expected benefit from the additional deposits, the AUD 1 billion deposits that you're expecting in Go, how does that benefit the NIM into FY 2026? Thanks.
Yeah. Thank you, Maddie. I'll let you, Blair, go through that.
Yeah. Absolutely. Obviously, you can see there was a little bit of softening in NIM in the second half rather than first half, but we did achieve a year-on-year improvement slightly in NIM, which I think is broadly in line with our guidance. In terms of the mix issues, we obviously benefited from a shift towards more saver-style deposits and away from the very rate-sensitive term deposits that we saw. But there was also a broad mix change in the way we funded the bank. So we were using securitization more. There was obviously very positive conditions through the year that allowed us to run off some of the very rate-sensitive term deposits. You can see that in some of the mix shifts. So they were positives.
I think what you see in the walk, though, is also some downward pressure. And there are a couple of key things going on. As I mentioned, it was a one-off and rather unique scenario in terms of the replacement of the AT1 instrument. That had an impact of about 2 or 3 basis points downward in NIM, which is obviously a one-off impact as we replaced that with a Tier 2 instrument. Also, we began to utilize, again, some wholesale funding to give us more capital relief on assets that have high risk weighting. So that is part of our strategy to drive capital release from the bank. When we think about margin as we go forward, that's important to us, and we're obviously guided to that range.
But critically, it's about capital release from the bank. We will continue to explore different balance sheet strategies to allow us to liberate more capital out of the bank back to the group.
Yeah. I think it's important to highlight that for the bank, return on capital, while we have to guide towards NIM, return on capital will be the measure we'll be measuring success against.
And Julian, just to pick up the final point of your question, which was on the Go deposits, I mean, the goal we've got of AUD 1 billion of Go deposits in FY 2026 is an important scaling, I would call it, a scaling proof point. The math, I think, quite obviously would suggest that that's not going to have a hugely impactful impact on the total NIM position. We've always indicated that we expect that to be more meaningful in FY 2027. But undoubtedly, every dollar that we can add into Go in transaction accounts is going to be positive. And so that's why that growth number is really critical to us.
As I said before, the focus on balance sheet management to release capital is the most potent component in terms of levers we've got right now as we look at FY 2026 for the bank, with go continuing to scale over the top of that.
Okay. No, that's clear. Then maybe shifting to the platform business. I know in the past, you've talked about opportunities to help stabilize the margin and offset some of the mix impacts. Can you maybe talk to those options? Because at the moment, the margin is being diluted. But I just want to understand if there's any initiatives being put in place to support that margin or have they already been done and that the underlying margin is actually weaker, ex those initiatives? Thanks.
Yeah. Thanks. I mean, I think it's clearly a very competitive space in the platform space. There's many things that we're looking at, and I think we do have the advantage of having an investment management capability internally as well as the administration. So that does give us some options. I mean, there's things we're looking at with the trustee right now. We've got to have that best interest duty always in mind when it comes to customers. But I think if you look at our cash rates, we're clearly the most competitive in the space, both from the fees and return. So we're continuing to see if there's new developments we can put in place there.
And just looking at the investment management capability, as we've improved performance, how can we make sure that we're more part of those managed portfolios? And all those things are happening as we speak.
Okay. And that's not factored. Is that factored in your guidance for next year?
When we're thinking about guidance, we're thinking about all of those things. But clearly, we want to make sure we can deliver the guidance. We'll constantly be looking for upside, but we absolutely want to make sure we can deliver within that guidance.
Okay. Got it. Okay. Excellent. Thank you so much for that.
Thank you. We will now take our next question from Andrei Stadnik from Morgan Stanley. Please ask your question, Andrei.
Morning. Oh, afternoon. Sorry. Can I ask my first question just around slide 20? You're talking about, I think, almost 100 new advisors added in second half that are starting to use North, maybe over 100 for the year. At AUD 50 million per advisor, does this imply there's AUD 5-6 billion additional flows that could be coming through? And how are you thinking about some of your advisor relationships and penetration?
Yeah. Thanks for that question. I mean, clearly, we want to continue to grow advisors. As you said, we want to continue to grow advisors that support us. For us, we've designated that an active advisor has got greater than AUD 1 million in assets under advice. Many others use different metrics. The important things for me is that we continue to grow that number because we know we don't see flows from new advisors probably to about 12 months after we've started to interact with them or flows of any significance. I think the benefits you're seeing in our platforms business today, being that AUD 5.1 billion, is really the hard work signing up advisors and showing them our solution over the last couple of years. That is a really important number for us.
Guessing whether thats AUD 5 billion, AUD 10 billion, AUD 2 billion is a little hard, but I certainly want to see the flows grow or the net flows grow from the AUD 5.1 billion today. I would say that it's also important, though, that we keep support from those existing advisors, particularly Acumen or the ex-AMP, and we're seeing that support continue right now. And even in the recent surveys, we're top two in terms of those advisors that use us as a lead platform. So we've just got to keep on delivering on the solution. And I think with the recent change in our sales team, we can be a bit more aggressive yet again on the sales front because we know that we'll see benefits come through in the following 12 months.
Thank you. If I can ask kind of a follow-up question around the flows thematic. So I know that Netwealth and HUB24 give guidance on flows, not revenue margins, whereas you continue to stick with this view of giving guidance on revenue margins but not on flows, despite showing very clear pipeline and improvement structure and flows. So why wouldn't you consider giving guidance on flows?
Yeah. Look, we can consider that. But I think for the size of our book, which is large, relevant to the flows, it's still the size of the book and the margin that make more difference for the future. I mean, as we continue to build on that flow and if we got AUD 10 billion next year, we can have another look at it. But I mean, we believe right now the margin and the total AUM are better things for shareholders to be able to predict the future.
Thank you. And maybe one final question just around managed portfolios. So managed portfolios, I think you mentioned, is one of the reasons why the platform revenue margins are heading lower. But that's just the revenue margin. Can you talk about the profitability of managed portfolios and also some of the other benefits of driving growth there?
Yeah. I'll maybe pick that one up, Andrei. You're absolutely right. I mean, the profitability signature of managed portfolios is still really positive. For us, there is a mix issue as we come out of traditional managed funds, but we see the growth being in managed portfolios. I think the thing that we see that is the value-add component for managed portfolios is the same as advisors see. The simplicity of managing clients and that managed portfolio construct has the potential for them to therefore manage more clients and more volume per advisor. And that's a key metric for us because we know advisors are in short supply across the market. So the extent to which we can deliver efficiency benefits to advisors allows them and their practice to manage more clients and therefore drive more revenue.
And there's kind of two key levers in that, one being the managed portfolio construct, and we've got a really diverse range of those managed portfolios. And as Lex mentioned earlier, there is clearly an in-house investment capability that gives us opportunity to participate in those managed portfolios. And then the work that Edwina and the team are doing around digital tools, AI, and so forth will run in companion with that to drive that efficiency factor.
Thank you.
Thank you. We will now take our next question from Lafitani Sotiriou from MST Financial. Please ask your question, Lafitani.
Thank you. Can I start with a follow-up on Andre's profitability question on the investment platform? Just so we're clear, so yes, there is lower revenue margin coming through from the managed account side, but is the EBITDA margin the same for the revenue being generated, or is there an offsetting because of the scale benefits and then the automation benefits, have you got less costs that you're needing to invest in the process?
Maybe I'll answer that, Laf. Thanks for the question. We've absolutely got the capacity to continue to invest in the North platform, so that's factored into our plans. And from my point of view, the growth and the way that it's growing through those different product components doesn't give us any concerns in terms of the cost signature in the business.
But the profitability from, say, as it shifts across and what your sort of if the mix shift continues as it is into the next couple of years, can you anticipate continuing to be able to grow the earnings?
Yeah. Categorically, yes. I mean, I think we've demonstrated that we can deliver growth. Yes, there has been margin reduction over the last few years, but I think that's been tempered by the growth in the volume, which has helped us contain the variable costs, and we want to continue to make sure we can grow there. I would say, again, we've got investment management capability as the returns improve. We've got greater opportunities to make that part of the managed portfolio. And there's some other ideas we're working on at the moment to improve margin. So I'm not saying it's not a competitive environment, but I think we've got the foundations in play to make sure that we can build profitability. And clearly, growth is an important component of that.
Yep. Got it. Can I move on to the bank now? And so it was about nearly three years ago, 2.5 years ago, or you mentioned the initial change in bank strategy and investing. And the timeline given to us at the time was around 3 years before you started seeing some returns. And you're saying that the focus is on return on capital, and the return on capital was probably 6%-7%. Now it's down to 4% handle. So what is the key focus now? What are we looking for? What are the hurdles that we need to see that materially improve?
Yeah. Well, let me point out a few things. Firstly, you're right. We announced about 18 months ago that we were going to launch AMP Bank Go, and we, in fact, launched that in 2025 for all the reasons you said. We needed to have a diversification in funding and a cheaper base of funding, and that's the whole purpose of AMP Bank Go. Our criteria for the bank very clearly state is return on capital. If you look at the bank, that's why we're not growing the volume of lending. And in fact, the return on capital from last year in the bank traditional has grown from 5.2 to 5.7 for that reason.
I think the other thing I would point out is there is quite a bit of innovation happening in the balance sheet space in the market at the moment. You can see we've pulled down our risk-weighted assets, which gives capital relief in the bank, and we'll continue to look at new opportunities for that. But nothing has changed from what we announced. We expect 2025 to be the execution and 2026 and 2027 for AMP Bank Go to be about build when you'll start to see the benefits.
And so what's the target ROI or return on capital that you think you can get to in the next two years, right? So you're sitting at 4.4 in the second half.
Well, as I've said, the benefits would start to flow through the end of 2027. I mean, we're in a fairly dynamic market now when it comes to capital, and it's got to be in relative to the cost of capital, which is why return over cost of capital becomes the most important measure. I would see accretion in that 2027 year.
And accretion is even if you're 50% accretion, but even 50% accretion from here is still well below your cost of capital, right? So what kind of accretion are you expecting in the next year? This is a long time for the market to wait for you to get a turnaround on the bank. Are you a natural owner in having a bank? So historically, we asked you two, three years ago, "Why do you own the bank? What's your competitive advantage?" And you couldn't articulate one, right? And you still haven't shown it yet. So why should the investor community or shareholders continue to sit back and watch money being torched going into the bank?
Yeah. Laf, I think that's a fair question given the current environment. But I would say a couple of things before I'll ask Blair to comment on the ROC that you questioned. Firstly, I think we're always looking at opportunities. That's the role of us as a management team. That's the role of our board to continue to look at the best mix of portfolio. And AMP Bank Go, firstly, gave us options in terms of cost of funding, and it gave us options in terms of something else in the toolkit that we didn't have because, I remind you, before, we just lent and we took deposits at a high margin. And I think we're just continuing to execute on that.
But we're very well aware of the return versus the cost of capital, and it's something that is discussed frequently. I think the other thing I would point out, as you can see in the results, we are starting to release capital from the bank by utilizing better balance sheet management, and we'll continue to do that. I'll let you comment on the returns, Blair.
Yeah. I absolutely take your feedback, Laf, and they're valid points. I think that clearly, our focus on improvement is return on capital in the foreseeable future because, as you point out, frankly, it's not an acceptable level for us, and we don't want to be in a situation where we've deployed capital on that return. So improving return is critical. I think the other immediate lever right now, though, is also, frankly, reducing the amount of capital that is deployed against the bank. And as Lex was mentioning, we're exploring aggressively a range of options around balance sheet management because if you look at the capital deployed in the bank, I think there are clearly opportunities to release that back to the group, and that will drive improvement at a group level while we continue to address the underlying metrics in the bank itself.
Can I move on to the inorganic opportunities you flagged potentially in scaling up in wealth? Can you give us some kind of framework as to what you're looking at? So in particular, are there capability gaps, or can you rule out whether you're looking at stuff like Panorama or CFS at the moment?
Yeah. I mean, as you know, it's not about capability gaps that we might have today. I don't believe there's any glaring gaps in our portfolio, especially on the wealth side. But we're in a dynamic environment, and particularly in our platforms business, our primary objective is trying to make advisors' lives easier so they can focus on working with their customers. So if there's capability there that we can bring in that would accelerate what we can deliver to advisors, we will. And there's many opportunities we look at constantly in that space to bring in capability, but it would be about augmenting. I mean, yeah, there is scuttlebutt in the market, and there's change happening in the market. And we have to be completely open about that.
We are all aware of that's happening. We are all aware that scale is important. I mean, are we specifically looking at some of those at the moment? We're always looking in the market, but there's not anything active happening, and we have to listen to our shareholders when we consider any options like that. But we absolutely will look at capability.
And just finally, with the buyback, given where the share price is now, could we expect that the relative investment now makes more sense, you're at a discount to NAV, to step in? Or how should we think about what will actually trigger a buyback coming through because you've now put it on the table as a priority? And are there any asset sales that are being considered? So I remember in the past, you talked about possibly selling PCCP. You've also toyed with, is the bank core or non-core? Is there anything that you can talk to?
Yeah. Well, firstly, let me talk about the buyback. I mean, we wanted to be explicit about the fact that if there was further capital returns above the announced dividends and the announced dividends both now and through 2026 and 2027, that it would need to be in buyback for all the reasons we've discussed in relation to franking credit. So we wanted to be explicit about that. I mean, I think we've demonstrated that we've been pretty regimental about managing our capital over the last few years and giving back to shareholders where it made sense. And clearly, share price is a very important component in thinking about capital management, and I know the board will be very focused on that.
I'm not going to sit here and make any particular promises about that today, but clearly, share price is an important component. When it comes to asset sales, I mean, we've been explicit in the past, and I think in his statements today, Blair was pretty explicit about the fact that PCCP or the U.S. real estate business is not strategic to us. It's certainly not a component that we want in the portfolio long term, but it's a good business, and we want to make sure we get value out of that business. So at the right time, we will look to do something in that space.
And the bank?
I mean, it's not on the table at the moment for all the reasons I've talked about. I'm not saying it will never be on the table. I think the board and I are very responsible about the fact that entertaining all ideas that come through the door, and if they make sense, we would consider them.
Great. Thank you. We will now take our next question from Nigel Pittaway from Citi. Please ask your question, Nigel.
Good afternoon. Just a couple of questions, if I could, on the S&I business. I mean, in the first half, you did talk about seasonal impacts and the likelihood of the margin expanding second half. That obviously didn't occur. So can you explain why those seasonal impacts didn't come through as you expected?
Not sure we talked about the margin expanding, but so.
Well, by assuming flat guidance, you effectively implied it. Go ahead.
Yeah.
Maybe, Nigel, I think Lex is right. We didn't talk to a margin expansion, but we certainly were cautious about options in the second half. I think the key thing that has driven that margin position is obviously the AUM growth, as I highlighted. As you get individual balances per client growing, that intersects with the fee caps and mix. And so that continues. While it's great that we get AUM up and you can see it on the total profit number, which is great for S&I, that does have some impact on margin. I think the reason I called out in S&I the gross versus net is that you could see equally the IMEs came down. So on a net basis, it's actually flat year on year. So that's encouraging.
I think for me, holding that margin steady is a really important activity for the whole team and particularly the management team within S&I. The critical factor beyond that, obviously, for us is continuing to drive that improvement in volume. As you talked to, we saw some seasonal factors in the first half. We want to continue the broader trajectory year on year and track towards that positive cash flow growth.
Okay. I got the impression there were seasonal factors due in the second half because, I mean, although, yes, okay, you didn't say expanding. It was implied because you said flat for the full year, which meant it had to expand in second half. Yeah. So the seasonal factors just seem to have they were on the slides in first half. They seem to have dissipated.
Yeah. Nigel, I think we've learned from using approximate because the top number tends to be taken. So try to be a bit more specific with our guidance this year.
Okay. Then maybe on flows in S&I. I mean, previously, you've expressed a decent amount of confidence that you can get this business into positive flows. You were hopeful that sort of in particular, the retention initiatives that you were deploying would facilitate that. I don't seem to see much confidence of that in the presentation today. So just are you still confident of moving that relatively soon into a positive flow position?
I don't think we've changed from our ambition that 2026 is a year that we'd like to turn to neutral flows. So we certainly have not walked away from that ambition. I'm not saying it's easy, but the ambition is still firmly on the table, and we're all running towards it. I mean, we all know that the June month is a bit of an anomaly, but I think we've got all the elements in place to drive towards that.
Okay. Then can you also maybe just give us sort of a bit of an update on how My North Lifetime is going and whether you've had any success in sort of being able to streamline the sales process to make that more readily attractive to advisors?
Yeah. You're right. We have because I think when we launched that product, we launched a product, and we needed to spend a bit more time building the interaction and the education of advisors around that. We are starting to see growth in that now. And maybe Blair has the actual numbers. I can't remember them off the top of the head. But I think the fact that many of our competitors are copying, whether they're executed on it or planning to deliver on it, is an indication that we are starting to see flows in that space. It's not just the flows, I'd remind you, that we get from retirement. It's also the rest of the flows that come with the advisor community when they bring those products across.
But I'll just try and get you the exact numbers that we've seen in that space, Blair.
Yeah. The year-end position for lifetime AUM, I think from memory, AUD 764 million. So that's substantially up on where we ended 2024, which I think was roughly AUD 340 million. So we continue to see that scale. We made some changes just subtly to the configuration of the product offer, which definitely improved flows in this year. And our expectation is that growth will continue as we go forward, but certainly a good growth rate on 2025 numbers over 2024.
Okay. Thank you.
Thank you. We will now take our next question from Andrew Buncombe from Macquarie. Please ask your question, Andrew.
Hi. Thank you for taking my questions. Just two from me. The first one, apologies if I missed it, but have you provided expectations for your loan growth in the bank in FY 2026? And if not, how are you thinking about it? Thanks.
Yeah. No change in our strategy there. It's margin over volume, so you could expect quite flat in terms of total loans.
Excellent. And then the other one from me was in relation to the outstanding class actions. There were one or two comments to them in the slide pack again today. Maybe if you can just give us a bit of an update, how many are outstanding, and the updated expected timelines on those, please. Thank you.
Y eah. Just to remind you, there were four class actions we had as a result of the Royal Commission. We've come to settlement arrangements on all four of those now. They all haven't actually gone through the court process yet, and we haven't paid all the proceedings, but we've agreed settlements. So I would expect that they would be complete during the 2026 year. There was one new class action that came to the party in 2025. I don't expect any real details or progress on that for some time. And I'm talking years, Andrew.
Yeah. So other than that new one, have provisions been made for all of those other ones before the balance date of 31st December 2025, or is that still to come? Thanks.
No. We provided for all of those in the 2025 accounts because we actually got to an agreement in relation to settlement. And in fact, we put out ASX releases when we actually did those. As I said, the only thing that's to complete is payment, but we've also allowed for that in our cash balances.
Yeah. If I can just clarify that, Andrew, in the capital position on slide 35, when you look at the group cash pro forma, we've adjusted that so that it accounts for the sort of cash we're holding for the pay away once it goes through the court process this year.
Excellent. That's it from me. Thank you.
Thank you.
Thank you. Our next question comes from Siddharth Parameswaran from JP Morgan. Please ask your question, Siddharth.
Good afternoon. Just a question just on competition in platforms on pricing and incentivisation of advisors or just preferential pricing. Just want to get your perspective of whether competition is increasing in the platform space. I think we've seen a little bit of revenue margin compression across the board. I take your point that there could be some investment mix shifts, and maybe just the growth of the managed accounts section is having an impact. But maybe if you could just provide some color around pricing in particular in the market and what you've done and what's in your guidance for next year.
Yeah. I don't think the pricing has got any more or less over the last few years than it is today. So I'm not sure it's price that we're actually competing on at the moment. As you said, it's more a mixture issue, but certainly remains a very competitive space. But I'm not seeing too much pressure from a headline price perspective.
Okay. So that's the same in your guidance for revenue margins into 2026?
That's correct.
Yep. Yep.
Okay. And just a question on variable costs as a percentage of AUM. They seem to be coming down again. Just wanted to get a perspective on what's happening there and what the outlook is.
Yeah. Blair, do you want to take that one?
Yeah. I mean, there's obviously mix issues in there in terms of IMEs as well as some other components like brokerage expenses and the like. So they largely are a function of actions by clients in terms of mix choices, which flows through IMEs, and the related variable costs associated with that, as I say, particularly things like brokerage.
Okay. Thank you very much. Thanks.
Thank you. Next is a follow-up question from the line of Andrei Stadnik from Morgan Stanley. Please go ahead, Andrei. Yeah.
Afternoon. Can I ask just around the NIM guide for the bank? Have you considered the current so just the recent interest rate increase in that, and have you allowed any further cash rate increases?
I mean, no. We probably didn't allow for that. But let me make a comment about our bank. Because to date, we get funding through deposits, and we lend, we kind of sway on both sides, which is the whole reason for creating AMP Bank Go because to date, we don't have a large amount of transaction accounts that have little interest rate on them. So a rate change for us is probably not as important as it might be to some other players.
Thank you. And look, for my second question.
It means both sides of the balance sheet.
Right to that, yeah. And look, and another question, if I can, just in terms of capital management, can I ask how quickly could you move on buybacks? And also, why would you give guidance for flat dividend for two years? I mean, does that not imply that you're not even expecting to grow earnings? Why would you give flat dividend guidance all the way two years out, which is incredibly unusual, I think?
Yeah. Let me just make a comment on that, and then I'll ask Blair to comment on the capital. Why have we given that guidance on dividends, and why have we been so explicit about buyback? It's because we wanted to give consistency around the franking credits. And we don't, at this point, have a large pool of franking credits. So that's why we've given a consistent dividend. That does not mean that we would not give capital back to our shareholders, but the preferred method above that AUD 0.02 would be through a buyback for those reasons, the franking credits. Blair, is there anything else?
Yeah. No. Absolutely, Lex. I think your point, Andrew, is a little unusual, but I think the very small franking credit balance we have definitely influences that view. And obviously, I think we've had pretty clear feedback that buyback would be preferred beyond that. If we have surplus capital and there's not a compelling and I would stress compelling - alternative use of that, then absolutely, we want to return that to shareholders. In terms of timing, well, there's just procedural things to go through, but that's all manageable in terms of if the board concludes that view, then we're just set about that process.
Thank you. I am showing no further questions. Thank you all very much for your questions. I'll now turn the conference back to Alexis for closing comments.
Yes. Thank you very much. And thank you for everybody for listening in today. I don't think any of us are immune to the shareholder reaction today. I would certainly take that into consideration. But I want to reiterate that I think these are a credible set of results, and we've delivered on our promises. And I feel proud of what sits in front of us today. So thank you, everybody.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.