AMP Limited (AMP) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to AMP full year results. I'd welcome you also on this Valentine's Day, which is our second Valentine's Day to deliver the results. Before I commence today, can I firstly recognize the traditional custodians of the land on which we're holding this meeting, which for us is the Gadigal People of the Eora Nation, and I'd like to pay my respects to the Elders past and present. I also, of course, have with me today Blair Vernon, who is the CFO of the organization. Right. So what are we going to talk through today? Firstly, I just want to give you a brief overview of the results, then Blair will do a deep dive into all of the results, including a focus on costs and capital. And then we're going to go further into the BU results, together with the achievements through '24 and what we're planning to focus on in '25. And of course, we're going to finish with some guidance and allow time for Q&A. If I just look at the overall result, I believe we continue to deliver on financial performance, but also business performance. Underlying profits, up over 15% to $236 million. And correspondingly, our earnings per share are up 25% through performance, but also the share buyback. We're delivering on the controllable cost promises, despite the sticky inflation which has been absorbed, and we're going to continue to do that through 2025. Our AUM has increased nearly 11%, albeit a good market, but the flows are improving and increasing in all of our wealth businesses. On top of that, we've executed on an Advice transaction that we believe will deliver benefits for all our stakeholders, including the advisers that have moved to entirety. With completion of our share buyback of $1.1 billion, we continue our capital program with the announcement of a final dividend of $0.01 franked 20%, taking the full year dividend to $0.03. If I just look at our businesses overall, as mentioned, our wealth businesses are delivering improving results. Platform is showing great traction in IFAs with a real focus on that core market of super and pensions. Our superannuation investment business is now delivering on price, performance, good insurance, service, and pleasingly our reputation is at all time averages, and this is leading to really improved flows. New Zealand is a more challenging environment, but the business keeps delivering as well as diversifying the revenue base. And when we come to bank, I think we all know it's a more challenging environment for small banks, but we've delivered modest growth in the second half as indicated and continue to focus on margin. I'm also very pleased with the execution capability during the year. We've been using AI and have now launched at scale across our contact center in S&I and are in the process of rolling across the other contact centers. We're also delivering some solutions for advisers in terms of meeting prep for clients. Coming to our portfolio, we can see that with the Advice transaction, the portfolio continues to simplify. All of our remaining businesses now have clear growth strategies to execute upon. The partnerships have also shown improved growth and performance in '24 removing some of the one-offs that we experienced in the prior year. Just contextually, we can see that we continue to compete in an environment where the dynamics are positive for all of our businesses. There's high household wealth, especially in the more mature demographic, a thriving super environment with increasing focus on retirement needs, where we have been specializing for the last few years, increasing needs for advice where we can leverage our partnerships, as well as the intrafund capabilities we have and the new digital proposition that we launched last month. We also now have a solution for those micro and small businesses, together with the launch of transaction capability in our new bank. Our shareholders are a key stakeholder, but we also remain focused on our other stakeholders being customers, people and community. Customer satisfaction scores continue to improve across all of our businesses. Our staff engagement has increased another point in '24 and our foundation continues to support the community with not only charitable donations, but also over 13 million committed to impact investments. And we've maintained carbon neutrality for the 12th year in a row. Blair, can I ask you now to talk through the detailed financials?

Thanks, Lex. Turning to the results summary. As Lex mentioned, underlying NPAT is up over 15% in the year to $236 million. Total revenue was down slightly compared to the prior year, with increases seen in our wealth management businesses, but offset by bank earnings as a result of the margin compression we've previously spoken to. Our cost efficiency focus continues to emerge positively across the business. Variable costs are down 7.5% in the year, mostly attributable to reduced investment management expenses, while controllable costs are down 6.1% to $648 million, delivering ahead of our target of $660 million for the year. Earnings per share are up 25% to $0.09, as Lex mentioned. And pleasingly, the cost to income at a group level fell a further 2.7% to 63.8% for the year. Statutory NPAT continues to be a simpler reconciliation compared to prior years. Business simplification expenses is the most significant item at $43 million after tax, which is in line with our previously communicated program spend in this area. Other items at $34 million after tax predominantly reflects the already advised $36 million loss resulting from the Advice transaction. Year-on-year stat profit is down given the 2023 performance was materially impacted on the upside by the sale of the AMP Capital and SuperConcepts businesses. Just turning to AUM, as Lex mentioned, up by almost 11% for the FY '24 year at the close. Pleasingly, the significant uplift in cash flows and platforms and the improved retention in Super & Investments have contributed positively relative to FY '23. The majority of the overall increase is accounted for in market movements, which were significantly positive through the year. Margins in our wealth businesses saw a modest decline, largely in line with expectations, and we will discuss further as we turn to each of the individual business units, particularly platforms. Just turning to the business unit overview snapshot, breaking out NPAT across those reported business units shows continued improvement across our wealth businesses, offset by that reduced performance in AMP Bank. The platforms highlight for us was the significantly improved cash flow over prior year. Super & Investments continued to improve retention off the back of that improved offer to clients. Bank profits were impacted by NIM compression, but a strong cost-out response offsets that in part. New Zealand continues to deliver consistently year-on-year, and our group performance improved year-on-year, a function of the increased partnership revenue as well as benefiting from our business simplification program. Now turning to costs in a little more detail. Controllable costs, as I mentioned, were $648 million for the year. Adjusting for the Advice sale, our target for FY '24 was $660 million. So this outcome from our perspective is very positive. Employee costs continue to reduce, reflecting reduced headcount through FY '24, but also the run rate effect of the reductions that we talked to late in FY '23. Insurance and professional services costs also saw a significant reduction as we further streamline vendor contracts and also reduce our overall consulting support. Technology costs reflecting -- increased, slightly reflecting both our ongoing investment in business units for growth, and at the same time, this area absorbed most of the impact of stranded costs, which we expect to continue to address in the coming year. This absolute reduction in controllable cost is a significant achievement considering we absorbed approximately $20 million of inflation impacts emerging in our cost base, particularly in the latter half of FY '24. Our FY '25 controllable cost target is confirmed at $600 million, which will represent a further 7.4% reduction on our FY '24 performance. A substantial part of this reduction will be addressing stranded costs within the business arising from the Advice transaction. We expect the majority of controllable cost savings to continue to emerge through the group cost centers, thereby ensuring our business units can maintain a balance of focus on growth. Our business simplification program continues into 2025 with a forecast investment of up to $150 million pre-tax, unchanged from our previous guidance. Consistent with FY '24, we anticipate absorbing inflation and other business unit growth-related cost uplifts within this absolute target. Now turning to capital. As previously flagged, the conclusion of our $1.1 billion capital return program in 2024 provided the opportunity to reassess our overall capital position and also our approach to reporting this aspect to the market. Common equity Tier 1 is our preferred measure for reporting capital moving forward. It comprises shareholder equity but removes DTAs, investments and associates as well as other regulatory adjustments. Total capital resources reduced 5.5% year-on-year, largely reflecting that final tranche of our capital return program. Deductions for regulatory adjustments and DTAs are reflected in the table, showing a group CET1 total capital position of $1.769 billion. Set against our calculated CET1 capital requirements of $1.63 billion, we have an FY '24 CET1 capital surplus of $139 million. For completeness, we've also provided the summary of our capital return program across all 3 tranches. This highlights the significant reduction in issued shares as a result of the program with an average buyback price per share of $1.16. As we've done in previous periods, this waterfall shows the movement year-on-year of our excess CET1 capital. Net of profit uplift, the predominant feature is, of course, our buyback program completed in 2024, as I've just spoken to. Our approach to capital management moving forward is framed by a number of considerations. Naturally, we're looking to manage our balance sheet through the economic cycle with an overriding goal of enhancing shareholder returns. We believe modest leverage is appropriate for a group such as ours. And most importantly, having completed the significant capital return program, we are mindful of reorientating towards growth in our business portfolio. Our revised CET1 capital framework includes our required buffers above regulatory minimums. Our goal is to target stable returns to shareholders while managing for one-off events appropriately. As Lex mentioned, we are declaring a final dividend of $0.01 per share, 20% franked, which will see our FY '24 full year dividend of $0.03 per share. Looking forward, we are targeting a dividend of $0.02 per share per half through FY '25 at the same 20% franking rate. We see 2025 as having a number of uncertainties. Hence, we have elected to focus our guidance on FY '25 at the present point. Our forward view of dividends is framed against these considerations we note on the slide, seeking to close out legacy matters, realizing upside opportunities as they emerge and above all, positioning us for growth. Lex and I are now going to talk to further detail across each of our business units. Firstly, turning to platforms. Platforms NPAT is up almost 19% in the year to $107 million. Net cash flows of $2.8 billion are almost double our FY '23 performance with particularly strong flows in H2. Managed portfolios continue to grow strongly, closing the year with over $19 billion of AUM. The North Guarantee product had a positive impact of $10 million on the FY '24 result, reflecting favorable conditions, albeit that was slightly down on FY '23. While we continue to invest for growth in this key business unit, the management team have equally maintained a disciplined cost focus, including lowering investment management expenses. Average margin was down slightly at 45 basis points, which remains a key area of focus for us. Turning to margin in more detail. The 2 basis point reduction we reported in FY '24 has emerged in our other fees category, mostly the investment management fees component. The key driver of this change is reflected in the bar graph at the bottom of the slide, which essentially highlights the changing mix of our AUM. Growth in management portfolios through the year is at a narrower total margin than our traditional managed funds products. And so the change here is a consequence of growth mix, not a change in our pricing formula per se. Margin in H2 was lower than the average margin of 45 basis points that we report here through the year on this slide. We remain confident the actions already underway by management will see an improvement in this trend as we look into FY '25, and we'll address that when we come to our guidance slide. The significant improvement in net cash flow through FY '24 is highlighted further in this year-on-year comparison. As we've previously reported, our book has overweight super and pension balances compared to many other platforms, which is reflective of our clear strategic focus on this part of the market. Following the divestment of our Advice business, we have baselined our approach to measuring advisers using North. North has a total adviser population of more than 4,000 users. Our primary focus for growth and retention, however, are the 2,188 advisers with greater than $1 million of FUA on North, and this is a key metric we are seeking to grow. Beyond this, there remains a significant addressable market of advisers who don't yet use North, and we believe would particularly benefit from access to our market-leading retirement solution for their clients. During FY '24, we established 99 new distribution agreements with AFSL holders and added over 140 new advisers to the North platform.

We do operate in a market of greater than $4.1 trillion, which continues to grow at pretty good multiples. We are one of the leading players in super and pensions, and we do have a vision to be the place people can come to, to gain confidence in retirement. We've demonstrated that we can innovate in this area through our new Lifetime solutions, which now has $350 million in assets under management, but just as importantly, $460 million of new assets under management as a result of the launch of these solutions. And we are unique in that we've got solutions across the spectrum, whether it's simplicity for the direct clients or simple needs for advisers' clients and more complex needs where North caters. We've also built a relationship with entirety through the Advice transaction, and we see growth opportunities for both parties here. And I want to say that advice is in our DNA, and we're proud of the solutions that we continue to co-develop with our advice partners. In '24, we continued the good work in our Platforms business, investing in sales capability and management. We continue to invest in digital capability for both advisers and their clients. We're now starting to bring new practices, advisers and customers to the platform, as Blair indicated. And Lifetime is now used by 85 licensee with 73% of clients being new to North, and it remains a real opportunity and focus for us through '25. In this year, we need to continue on the journey and keep doing what we're doing. We want to improve and add to the retirement solutions we've already delivered, further digitization, including tools using AI to assist our advisers and look further for opportunities to leverage that AI capability. We want to use our investment management capability to improve the margins.

Turning now to Super & Investments. Underlying NPAT for our Super & Investments business is up more than 26% at $67 million for the year. This result reflects positive market conditions, reduced costs, but also a one-off positive impact to investment income of $4 million in the FY '24 year. Disciplined cost control saw reductions in both controllable and variable costs, noting we don't anticipate IME cost reductions to replicate in future years. Margin management continued to be a strength in this business, averaging 63 basis points for the year. Investment returns in excess of 15% for MySuper members in 2024 contributed to our enhanced proposition for members. That improving overall value proposition for members is reflected in the significantly improved net cash flow result for FY '24 shown in this graph. This continued year-on-year improvement is predominantly a function of improved retention across the portfolio. Excluding mandate losses in prior years, our trend towards positive overall net cash flows continues in line with our previous guidance.

As with the Platforms business, for our S&I business, we're playing in a large market, and we have a very big brand. The business is now majority personal members who tend to be more engaged, particularly as we now have those key ingredients for success that I talked about, price, performance, insurance, service and reputation. We also have less exposure to those very large corporates, which does reduce our future risk, and it allows us to focus a little more. I should add that, that mid-corporate sector does remain an area of interest for us and one we continue to engage with. If I look at '24 and '25, you can see good progress in '24 with top quartile performance. We've improved our member experience and upgraded our website to allow easier interaction. We've also improved our reputation to long-term averages, which is particularly important for this sector of the market. And we've improved brand awareness and most importantly, consideration for AMP as a superannuation provider. And we've made retention in this business a priority with outbound calling and our new advertising. In '25, already, we've launched our new digital advice solution in January. And to date, we have nearly 900 customers who have done their retirement checks with 50% of those going through to the advice solution, all without a single dollar of marketing. We will launch new lifetime solutions, which are more simple than ones we have on platform in the next quarter, and we continue to drive awareness in corporate and super spaces -- personal spaces for our solutions.

Now turning to the bank for FY '24. AMP Bank continues to operate in a highly competitive retail banking market on both sides of the balance sheet. NPAT for AMP Bank in FY '24 reduced to $72 million, reflecting lower net interest income as a result of our previously flagged NIM compression. Offsetting this revenue decline, the bank saw reduced costs across both variable and controllable lines as management responded to lighter business volumes, especially. Pleasingly, our actions have seen an improvement in trends in the second half of '24 with modest growth in mortgages against more limited margin compression. Key metrics such as LCR and CET1 remain comfortably above minimums, reflecting our prudent approach to managing the bank. Against that backdrop, the softening of return on capital and cost-to-income ratios remains a critical management focus. Over full year '24, we experienced 16 basis points of margin compression when comparing the full year averages. There are a range of mix changes in our loan book reflected in this walk, but notably, our retail deposit portfolio remains central to the challenge in NIM management for AMP Bank. This reinforces again the importance of our new digital bank offer to broaden deposit market opportunities for the bank. Consistent with prior periods, we remain vigilant and focused on credit quality as reflected in these key data points on this slide. Despite prevailing economic conditions, more than 60% of our mortgage customers remain ahead on their repayments. Our average dynamic LVR at a total book level is 53%, and we have only a nominal volume of loans greater than 90% LVR. Arrears rates continue to normalize through H2, further reflecting our conservative overall credit position.

You're well aware that the market we're operating in with our bank remains extremely competitive. We've made a conscious effort to focus on margin over volume. We did deliver modest growth in the second half, as we previously indicated, and we continue to focus on driving efficiencies and looking for those niche opportunities to add both margin and volume. We've maintained positive relationships with brokers, which remain an important stakeholder for us given the distribution. And we're focused on those higher-margin investor as well as making it easier for the self-employed borrower, which is consistent with the strategy for the launch of our new bank capability. Speaking of our new bank, I want to step back a moment and just a reminder about why we launched this proposition. Firstly, we do see it as an opportunity in that smaller micro space where not many others are focused. And also importantly, it creates a diversity in our customer base, but also in our deposit funding as well as adding transaction accounts for our personal customers. While the official launch was this week, family and friends have been testing for many months. The new numberless card, which delivers greater security and safety for our customers has excited interest, and we have over 11,000 preregistered parties to sign up -- who signed up to campaigns to have a look at the proposition. The launch is fully functioning, including transaction accounts and we will have frequent releases through '25, but these will depend on customer behavior and requirements.

Now turning to our New Zealand business. NZ Wealth Management continues to perform strongly in a challenging market with NPAT up over 8% to $37 million for the year. The strategy of revenue diversification in this business continues to be executed against with improved revenue across both lines. Controllable costs reduced year-on-year despite elevated local inflation, reflecting a sustained business simplification program in this business. Margin eased slightly through the year, reflecting the ongoing change in mix with predominantly that growth in KiwiSaver, which is a lower-margin product across the board. Net cash flows were positive, reflecting a focus on the KiwiSaver growth as well as our focus on corporate superannuation retention activities.

The New Zealand business is a little different than the Australian, having a presence in KiwiSaver, but also a footprint in general insurance distribution and a bigger footprint in advice and financial coaching. While the dynamics of the market are a little more challenging at the moment, the long-term trends still remain positive. We are well positioned, especially in that area of workplace solutions around KiwiSaver. In '24, you can see that our investment performance continued to improve the maturity of the new strategy that we implemented in '21. The enable.me acquisition is expanding and helping to diversify revenue for our business. And KiwiSaver was up almost 4% in terms of funds due to retention and as I mentioned, the workplace arrangements. In '25, we need our New Zealand business to just keep doing what it's been doing, acknowledging that it is a more difficult economic environment.

Now finally, turning to our group business unit. Our partnerships in China saw significant improvements through the year, up more than 20% to $47 million for the year. Other partnerships, which predominantly represents our PCCP business in the U.S. rebounded significantly, contributing $32 million to the result. Collectively, the 36% improvement in our partnership's performance sees a return more in line with our expectations of performance through the cycle. Other revenue at $13 million reflects the residual revenue signature of the retained assets associated with the now discontinued Advice business unit. Controllable costs fell almost 10%, although remain elevated as a result of stranded costs being held at the corporate center. This remains our clear focus for improvement in FY '25. Interest expense on corporate debt is down in the year, reflecting minor timing differences in the recycling of facilities into year. Investment income from group cash is down year-on-year, reflecting a reduction on group cash holdings as we further optimize our capital and liquidity position. NPAT performance for the group segment nonetheless continued to improve year-on-year.

Let us take a moment to look at our China partnerships. We've now been able to rebuild the relationships with China Life through the visits we've enabled over the last few years post COVID. The China market continues to remain supportive of both public and personal pension savings and both CLPC and CLAMP are benefiting from this focus and growth. As you'll see, the growth remains positive, and we're working hard to support this. Working with our partners to improve the dividend payout given the strong performance is certainly a priority for us through '25.

Now looking ahead to FY '25 guidance, which is presented on this slide and naturally subject to market conditions. In our Platforms business, we are forecasting a margin to be circa 43 basis points on average through the year, consistent with our average margin in the second half of '24. In our Super & Investments business, we forecast margin to be flat at circa 63 basis points. In AMP Bank, our expectation is that NIM will be broadly in line with FY '24 given the sustained competitive conditions we see prevailing in this segment. As previously noted, our controllable cost target is $600 million, and our business simplification program continues within our previous guidance of up to $150 million pre-tax for that program. Partnerships collectively are expected to return circa 10% per annum through the cycle.

So just in conclusion, '24 is a strong year of delivery being the culmination of many years of very hard work. The portfolio is simplified. The cost promises have been delivered and continue to be delivered in an inflationary environment. Growth is emerging in our wealth businesses. We've now delivered a new bank, digital advice and AI solutions for our people and customers. We've also returned $1.1 billion in capital to our shareholders and announced a continuation of $0.02 per half dividend through '25. In '25, we reorient our focus to growth, but I can assure you, we will not neglect the continual drive for efficiencies. Thank you for your time, and I'll now open to Q&A. Operator?

[Operator Instructions] First question comes from the line of Simon Fitzgerald from Jefferies.

I'll just leave it at 3. Just in terms of the split in the Platforms business between managed funds and managed portfolios, can you just sort of talk about -- this obviously, appears to be new business wins over the sort of legacy formats. But ultimately, how do you see that balance sort of playing out?

Yes. I think if we look at the trends in the market at the moment, there is a greater propensity for the new business to come through the managed portfolios because that's really making it easier for advisers to advise their clients. I'm not suggesting that, that's going to all happen through '25, but certainly, that is where a lot of the growth is coming for the advice machine, Simon.

That's fair. And could you just sort of talk about the premium that you would have got on, say, the old sort of managed funds versus the new sort of format of managed portfolios? Just trying to understand the difference in there.

Yes. Well, you can see that most of the -- apart from a couple of different items, which won't reappear in '25, the margin reduction that we've experienced through the year was predominantly as a result of that portfolio mix. I mean, as I said, we're in a unique position that we've got an investment management capability, which most of our competitors don't, so we can utilize that to gain some of that back through '25. We've already put a lot of those initiatives in play, which is why we don't see any further degradation. But there definitely is some decline that you can see through '24 as a result of that mix.

Sure. And just a question on capital, just with the CET1 capital requirements. I was interested to know if the Board buffer reduced over that, just given the residential mortgage book declined by at least $1 billion. I was trying to sort of think about how the Board buffer may have changed.

I'll ask Blair to talk through that.

No, the Board buffer itself didn't change materially. Obviously, it takes into account that the mortgage book you talked about will come within the MRR requirement. The Board buffer sits on top of that for a range of other factors. And so there wasn't a material change.

I think it's important, if I may. I mean, obviously, there's a calculation that you do in relation to bank capital and for that matter, the wealth business as well. But I mean, when we talk about Board buffer, they've got to, of course, consider the risk environment. They've got to consider the stress testing that we have to undertake to make sure that we're going to have a viable business. But I can assure you our Board is not in the habit of putting excess margins over the top of the regulatory requirement.

I get that. But we've had an environment where you've seen improvement in impairments and you're sort of talking about it's not a very good environment for growth anyway. So that Board buffer could have been a bit slimmer I would have thought, but leave at that.

Sorry, just I'd say the Board buffer, obviously, doesn't just apply to the bank, certainly across a range of businesses and the group. So it's a composite of all those things.

Maybe if I could just ask on stranded costs then. The $45 million that's part of the business simplification that relates to the Advice business, what's the sort of time frame you think that you can extinguish that by?

'25 is our promise, Simon. We're not walking away from our cost promises in relation to that. So we're still committed to that $600 million that we put in our guidance. And a large part of that consists of the $45 million of stranded costs.

And then one final one, just on the CLAMP and CLPC, it looks like there was a reduction in the carrying values there. Just wondering what you could talk to in terms of what's behind that?

No, I don't believe there was a reduction in the carrying values. They both contributed to the profit result this year and they're equity accounted for. So we can take that up separately.

Our next question comes from the line of Andrei Stadnik from Morgan Stanley.

Can I ask my first question around the North Lifetime product? Can you just repeat those numbers? It seems like there was something below 500 and something just over 400. Can you just explain the difference? And how quickly have you been able to get to the sort of figures in the Lifetime? And what kind of customers are you finding success with?

Yes. So maybe I can just pause a moment there to talk about our Lifetime Solutions, which we launched in '23. And look, there's several reasons for the importance of that and why I mentioned the 2 figures, which I'll repeat. But firstly, our platform has been a good platform for many, many years. But I think as a result of AMP becoming internally focused, many other good platforms exist as well. So we really needed to innovate to have something different about our platform. And that's why the retirement solutions was really important because it allowed us to open doors to practices that we hadn't opened before. And of course, we want FUM on our retirement solutions, but it's also about the new customers and new advisers that we can bring to the platform. So over that period, and I think we launched in mid-'23 -- don't quote me on that. I can get the exact date, but it was around then. We've brought on actually in the retirement solutions $350 million. But I mentioned that second number of $40 million because that's new clients to the platform. And that's a really important indicator to us about how we're attracting new business.

My second question, can I ask around the deposit mix in the bank? That was a small benefit during the year. Can you explain a little bit about what's driving that?

Yes, I'll ask Blair to comment on that.

Yes. I mean there's obviously a range of mixes changes through the bank through the year. The deposit mix challenge we faced across the year was mostly around Saver. I mean, our TD portfolios still remain very, very competitive. But the Saver product and the Saver kind of category, I would describe it in the market is extremely competitive.

And my third question is, maybe a little bit of a side question. Can you explain a little bit about the innovative numberless debit cards that you're launching? And what sort of benefits do you expect for AMP or AMP's customers from that?

Yes. The new solutions that we've launched, I mean, the debit cards got a lot of attraction, but it actually goes far more broader than that. Firstly, it is a digital-only solution for small and micro businesses. So I'm not talking about small and medium. We're talking about the less than 20 and a lot of those are self-employed. So that's the first category. And the second category, our bank has not had fulsome transaction capability. So we're also launching fulsome transaction capability as part of these new solutions. As I said, it's digital only. It's not digital first. It is digital only, and it is quite a unique proposition. And we really wanted to launch this to diversify our deposit base, which we've just talked about. And of course, there's lower cost deposits for us in this new solution, which we just launched Monday and publicly on Wednesday.

Any -- sort of what kind of deposits you've already raised?

I think it would be a bit remiss of me after day 3 to throw a number out there. But clearly, it is something that's really important for us for improving the return on the bank over the longer term.

Our next question comes from the line of Julian Braganza from Goldman Sachs.

Maybe just a first question on the bank and just your NIM guidance into next year. Can you just maybe unpack that and just talk about what it assumes just in terms of potential cash rate cuts, changes in funding costs and the like? Just keen to understand and unpack that number.

Yes. I kind of think if we think about the NIM guidance, I mean, we expect that there's going to be rate cuts through the year, 2% to 3% is what our economists say at the moment. But when we look at the NIM guidance, we haven't factored that we'll be able to gain great margin improvements on the loan side for that, so we're assuming [ benign ] there. And as I just said, through the deposits, we could see some improvements there, but basically not factoring much benefit through the book through the rate reductions at this point, potential rate reductions. That's why you can see we pretty much forecast in line with this year.

Okay. And I mean just the time line for when we should start to see improvements. I mean, is there any signs that there could -- any visibility on that or just too difficult to tell from here?

I think on the mortgage side, there remains a very, very competitive market, and I don't see that easing up dramatically at this point. I mean when we come to the deposit side, there certainly is some indications that there may be easing there, but I think we're just really cautious about that at this point. And for our new bank, I would expect that the benefits would start to come through there in '26. Obviously, by the end of this year, we'll have a bit of an indication about where we're going to be positioned in terms of funding there, but I would expect the benefits to come through in '26.

And then maybe just shifting it to just the capital requirements. Just the deferred tax assets, I just want to be clear, was that at all impacted by the sale of the Advice business just in terms of allocation of that asset between AMP and the business that was sold?

Yes, there was a small impact of that, but that is not the majority of our deferred tax assets that has not been largely impacted by that sale. I'm not saying there wasn't some. There were small, but in comparison to the balance, not material.

And then just the lower capital requirements on the Platforms business. From memory, it was worth about $15 million, $16 million, correct me if I'm wrong. But is that still expected to be -- would that be -- would that come through to shareholders or how are you thinking about that?

Can you talk to that.

I think what you're referring to there might be the change in offer that's been talked about in the markets. Is that what you're -- yes. Yes, that's the sort of quantum that we would calc. And obviously, as we've said, our goal is to make sure we're as capital efficient as possible. And so -- what I would just caution is that change doesn't occur until 1 July. And so we'll go through a process with the trustee to work through that. That will take due consideration. And as that works through, then we'll look to realize that through capital resources.

And then just a final question on just your investment -- just your portfolio of investments across CLAMP, CLPC, PCCP. Any further comments around the strategy there to monetize value or just any updates there?

Yes. The strategy hasn't changed. I mean, I've said publicly a number of times, particularly our PCCP is not a strategic investment, and we're working with the founders there. But that is a really strong business, and I want to make sure we can get full value for that business. So I think it will depend -- be dependent on what happens in that real estate sector in the U.S. That remains something we're active engagement -- actively engaged with the founders. In terms of the rest of the assets, I mean, at the moment, we continue to work with our China Life partners to continue that growth, which is quite extraordinary and focus on them, given their performance is so good on improving the dividend payout ratio.

Our next question comes from Nigel Pittaway from Citi.

Just maybe returning to the bank initially. I mean just interested in sort of the volume growth strategy, particularly as we move into '25. I mean, obviously, you've had that bad debt impairment release that's helped the bank in second half. So presumably, that's nonrepeatable. And then with your margin guidance, obviously, you did return to growth a bit in the second half, but obviously still growing down for the full year and growing below system. So do we expect more of the same moving into next year? Or how should we think about that?

Yes. Nigel, thanks. That's a good question. I mean we're continuing to really focus on managing that margin over volume at any cost. I would expect that we will have nominal growth. As I just explained, I don't see there's much change in the margin dynamics. So I'd expect nominal growth through the first half of '25. But I mean, we're just continuing to focus on those niche opportunities. And yes, while there was a one-off, we really drove some efficiencies through the bank that comes through in the second half and into the full year for '25.

Maybe just moving then on to a bit more on platform margins. I mean, obviously, there is this -- I mean, how much do you think there's a trade-off between sort of generating potential flows and playing with the margin in that business? And also maybe just on the retirement income product, obviously, I mean, do you think there's a point at which we might sort of get an acceleration in flows in those products? I mean, you've talked about sort of leading -- those products leading advisers to North, but will that translate into material flows at some point, do you think?

Yes. There's a couple of questions in there. Firstly, I'd say we're not playing a price game on our platform, right? I mean it has -- the prices are impacted due to the mix. And while I consider that, that is kind of a market dynamic, clearly, we've been very transparent about the impact of that. As I mentioned, I think with our investment management capability, we do have options that we're exploring to get some of that back into the future, and that is a unique proposition we have. But that -- you could see that coming through to the second half and some of those initiatives are there, which will protect the margin into the latter half. So that's where I see margins. If I come to our retirement solutions, firstly, I'd point you, and you can see it in the data pack that our platform flows have been improving quarter-on-quarter for the last 12 months. And you can see that in every quarter. And in fact, the trends are longer than that. And I think those trends are really exciting for us and the focus. That's not all retirement solutions, but certainly some of it is. If we reflect on the learnings from retirement solutions, I think there's a couple of things. Firstly, the solution is fantastic. I mean, it's amazing opportunity for clients to enhance their pension in retirement, but it's complex, and it takes time for advisers to understand it, to be able to talk to customers about it. And they typically do it when they're doing a review as opposed to during the year or when they've got a new client. So I think it is taking time, but I think it is gaining traction. There's a lot of talk in the market about new solutions coming. And I don't think that will be a bad thing because we need to get more focus on this part of the market.

And maybe just -- sorry for the final question. Just I mean, obviously, you've talked about sort of wanting to keep capital aside to now sort of focus a little bit more on growth. And when you're thinking -- and obviously, the dividend was half in the second half that it was in the first half. When you're thinking about sort of organic versus inorganic growth, sort of how do you sort of think about that?

Yes. Thank you for that question. And maybe I can just make a couple of comments on the capital before I talk about the inorganic and organic growth. Firstly, when we sit here and -- with the Board deciding on the final year dividend, of course, we're very conscious about the fact that we have been a program of returning $1.1 billion. We had the $0.02 in the first half, the $0.01 in the second half and also about $240-odd million of share buyback during the year. But we also sit here and we go, we're in a bit of a volatile market. We've got some legacy items that we still need to work through, and we've got some upside there. It could be upside in terms of the AMP Capital investments. We just talked about non-strategic assets. So there's some upsides and downsides. And as a Board, we really wanted to give a bit of certainty through '25 about that $0.02 per half, which is why we announced the $0.01 per quarter and wanted to give the future guidance. And I think you'd also expect in this environment not to have 0 surplus. If I look forward to inorganic versus organic growth, I can assure you our focus is organic growth, like that's what we're living and breathing every day. And if there ever was to be inorganic growth, and I said this in the past, it might be bolt-on in terms of capability or it could be scale, but we're not looking at anything at the moment.

Next question comes from the line of Andrew Buncombe from Macquarie.

Just 2 from me, please. Just on the first one, you've obviously got a step down of $48 million in the controllable cost guidance for '25. Out of interest, how much of that has already been delivered?

Yes. Unfortunately, with controllable costs, if you don't have the initiatives in place by the end of the previous year, they're really difficult to deliver. So that's why I can confidently say that we're going to be delivering the controllable cost targets for '25. I mean, it's not going to be easy because we're still in a higher inflationary environment and perhaps understood when we made those commitments, but we are absolutely committed to delivering those controllable cost targets of $600 million.

So if I'm interpreting you correctly, should we be assuming that, that $600 million is flat half-on-half in '25 then?

Do you want to comment? We typically have higher costs in the second half to the first half because of our cycles.

Yes. If you look back over our prior periods, Andrew, you'll see there is a slight seasonality between first half, second half that's continued to narrow. But we typically see a little higher costs in the second half. The reality is, I would expect a little bit of that seasonality to continue, but continue to moderate. Obviously, there's always a little bit of timing. And so -- but the reality is, we are laser-focused on $600 million. We've got very clear pathways on the net -- I would stress the net $48 million that we need to remove, which is obviously -- when you gross that back up for inflation and so forth, is a larger number. So it's no mean feat in the current environment, I think.

And then my other question was in relation to the revenue margin guidance. You've given it for S&I and also for Platforms. Can you talk to how you're thinking about that metric in New Zealand as well, please?

Yes.

Yes. We've typically just given you the P&L for New Zealand. So as I said, we're kind of diversifying the revenue there. The New Zealand business has consistently delivered about the numbers we delivered this year in terms of NPAT. I don't see any real changes in that space at this point.

Next question comes from the line of Kieren Chidgey from UBS. Our next question comes from the line of Lafitani Sotiriou from MST Financial.

Can I first just double check, Alex, did you say that you aren't currently looking at any acquisitions?

I did say that, Laf. Except for new customers.

So you're not looking at any acquisition at the moment?

Well, except for new customers, we're always obviously looking for new customers.

So but not any acquisitions in the market?

We're not looking at anything at the moment, Laf.

Can I just then circle back on the overall capital discussions? Because previously, we could see what the Board buffers were for the respective businesses and -- or divisions, and you used to have broadly $500 million in the overall Board buffer. And so if that's still broadly the same? There was $200 million allocated to the group level. Can you just unpack what that is and provide a little bit more detail as to why it's not moving around?

Yes. I'll just ask Blair to talk through where -- how and where we're thinking about capital.

Yes. Just to reiterate the prior point, I mean, broadly, the Board buffer hasn't changed. And so we've -- but seeking to sort of get away from a conversation of minimum reg plus Board buffer, we've chosen to focus on sort of total requirement. In terms of the group allocation, Laf, that sort of circa $200 million, I mean, there's a number of things in there. But the most significant of which is the elements around the various indemnities, warranties and legacy matters that exist at a group level and that we would expect to continue to address over time. So it's not set in granite or stone, but the reality is at the moment, our focus is continuing to close out those matters and then prudently have a view about how that might emerge as available capital.

And so one of the things that we've spoken to in the past, and we're nearing some of the end dates for is the carried interest from previous asset sales. And you've got it there as a potential positive contributor for future periods in terms of capital. Can you just talk us through where that's tracking or if you -- and when we may get some more clarity on when the end date is for some of those hurdle rates?

Yes. Thanks, Laf. As you know, some of those go out through the years. And we haven't put it into our results for obvious reasons, because it does depend on performance. And I think we've said before, we anticipate positive performance, but I'm not going to make a predictor about it was, about what it would be, especially given the way markets are moving around. So look, I know and it's...

So can I just clarify, when some of those assets were sold, will -- you'd indicated at the time it would be 2 to 3 years, and we're in that time frame now.

Yes. We...

So I just don't quite understand when you said previously, it will be 2 to 3 years, and now we're at that point, and we still don't have any information. So one of it was in relation to the ability for fundraising occurring in those assets. Has that been occurring? Has it not been? I'm not -- I'm unclear why you can't give us any sort of extra color on what -- that's being said?

Most of the upside is from a payment once those assets are sold. As you can imagine -- and those are in particular funds. As you can imagine, given the environment, most of that -- all of those assets are offshore. Some of those funds can be extended for a period of time or they can be resolved at a period of time. I would expect that we'll see some of that through '25, but I'm not going to make promises because anything can happen in those PE funds, and we're monitoring it, but it depends on the value at the time that the assets are sold.

But that's 2 things, right? So that is the assets within those funds, but there was also talk at the time you sold the assets for performance fees or earn-outs if certain hurdles were reached. So have all the earn-outs hurdles just disappeared? Are you not entitled to get any of those earn-outs? Or is that still in the background?

I think it's still in the background.

Yes, I mean the critical threshold issue on those funds left is, obviously, closure. And as Lex mentioned, some of them have extension dates. Ultimately, the realization of any carry or performance fees is always going to be in question until the end. And so we are...

No, I understand that for the carried interest on the investments that you've got, but there was also components that were separate to that, that were based on assets you sold and having earn-outs attributed to whether they were successful in raising money and the like in those funds. So that just seems to have disappeared completely from the conversation. Does that mean you can no longer earn performance fees for that for the actual assets that were sold?

Yes. No, sorry. And so in terms of performance fees and particularly related to future fundraisings, we see that as unlikely based on where we currently stand...

You see those as unlikely?

Yes.

So those have disappeared?

Yes, we see them as unlikely, Laf.

And just one last question. Previously, you talked about for the Super Investments platform was potentially outsourcing the replatforming and exploring options in the market or whether you go it alone. Is that project still something that's on the radar? Or how should we think about that?

We are maintaining our platform internally. We're just focusing on the digitization and customer experience in relation to that. There is nothing wrong with the back end in terms of the ability to be able to process transactions. We just need to work on the digital capability.

We do have our last questions coming from the line of Siddharth Parameswaran from JPMorgan.

This is actually [indiscernible] from JPMorgan. Just 2 questions from me, please. So firstly, on cost out, just following on from Andrew's previous question. Should we expect any run rate benefits of cost-out actions taken in CY '25 into CY '26? And do you see any further cost-out opportunities beyond what you've communicated looking into CY '26 and beyond?

Yes. I mean most of -- I mean, while we've got some stranded costs we need to deal with, which might emerge only through '25, I would expect there will be continuation through '26. The one thing I want us to focus on as we're reorienting towards growth is a cost-to-income measure getting away from this absolute cost, because we really want to grow our businesses. So that's the measure I prefer to be thinking about in '26, and we can compare that with the market and with our competition as well. But yes, while there'll be some one-offs through '25, some of those benefits will flow through. At this point, other than the normal BAU focus on efficiencies, we're not going through a large-scale promise to the market in terms of further cost reductions after '25.

Do you expect that cost-to-income ratio to trend downwards from '26 and onwards?

That's absolutely our focus. And hopefully, it's a compartment of revenue growing and also just more efficiencies.

Just a second question on variable costs. It looks like those have come in better than expectations again. And I just want to understand what the drivers of this could be by segment. I know you mentioned investment management expenses as a key driver. Do you expect this to be the new level going forward? Or are there risks that this could kind of revert to historical levels?

Yes. Over the last couple of years, we've really spent quite a bit of time on simplifying the menu and the options, and you can see those IMEs coming down. I wouldn't expect the same level of efficiencies in the future given the work that we've done over the last couple of years. But obviously, it's something we continue to focus on and work on. Thank you. Thank you, operator, and thank you, everyone, for your attention today.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.