AMP to restructure AMP banking

By NZPA

Thursday 14th November 2002

Funds management company AMP Ltd said today it will significantly restructure its AMP Banking operation following a review of activities and costs.

AMP said AMP Banking would continue to provide retail deposits and mortgage products to Australian customers.

However it will use securitisation programs to minimise capital invested in business and potentially outsource set up and servicing functions to external providers.

AMP will exit manufacturing of banking products in New Zealand and the United Kingdom and will exit manufacturing of credit card products in Australia and New Zealand.

As well, it will exit the property finance business in Australia and New Zealand and offer products on a targeted basis in alliances with external manufacturers in the UK and New Zealand.

AMP said the changes are expected to enable it to reduce the amount of capital supporting the bank by around $A500 million ($NZ569.67 million) by the end of 2003.

By the end of 2003, less than $A100 million in capital will be required. By 2005, return on capital is expected to be well above the cost of capital, AMP said.

Employee numbers in banking will depend on the sale process and potential outsourcing of various functions.

If the outsourcing proceeds, it is expected AMP Banking will have less than 100 employees by the end of 2003, compared with about 600 currently.

AMP said it would undertake a structured sale process over the next few months for the sale of the property finance, as well as the UK and New Zealand mortgage businesses.

It said it has already entered exclusive discussions with American Express over the credit card portfolio in Australia and New Zealand.

The UK and New Zealand savings deposits will either be wound back or transferred to other banks.

AMP branded credit cards will still be distributed in Australia. Mortgages and deposits will be offered in New Zealand and the UK through distribution agreements.

AMP chief executive Andrew Mohl said the review of AMP Banking considered a number of options, including outright sale.

It had been determined that the best approach was for the bank to be significantly restructured to ensure it operated only in profitable areas where it could leverage its strong brand names.

"The bank currently operates in a number of different geographies and product areas -- and we have realised that we cannot afford to be all things to all people," he said.

As well, AMP also announced today that its corporate office has been significantly cut back and its role redefined.

"Our review found that the corporate office was not focused on the essentials. It will now be refocused on strategy and governance and work more closely in partnership with individual business lines," Mr Mohl said.

He said a number of changes relate to the former AMP International (AMPI) operations, with changes including the closure of the AMPI corporate centre, the closure of AMP New Ventures and a winding back of AMP Asia including the closure of the Singapore office, a reduction in Sydney based development activities and the scaling back of the Beijing office.

Mr Mohl said the changed focus of the corporate office as well as the scaling back of AMPI, meant a number of structural changes could be made.

The number of corporate roles in Australia and the UK has been reduced by about 160 to a total of 215, or about 40 percent. About 40 of these 160 roles will be transferred to business units.

Cost savings of about $A40 million are expected in 2003 with run rate savings of $A50 million by the end of 2003.

Redundancy costs are expected to be around $A20 million.

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