Amp Sells Off $3bn Of Its Bank Loan Portfolio
Sydney Morning Herald
Tuesday April 15, 2003
AMP managing director Andrew Mohl has taken another step in cleaning up the financial services group's grab-bag of underperforming assets by offloading close to $3 billion worth of home loan and commercial finance portfolios in Australia and New Zealand.
In two separate deals related to AMP's small banking operations, London bank HSBC will pay $NZ27 million ($24.4 million) to take control of AMP's $NZ1.7 billion portfolio of NZ mortgages, $NZ149 million of mixed loans and $NZ390 million of deposits, while GE Commercial Finance assumes AMP's $1.25 billion in commercial property finance assets in Australia and New Zealand.
AMP did not disclose the combined proceeds. But the HSBC deal was believed to have been struck at a small premium to book value and the GE deal at a small discount so that overall, the proceeds are in line with book value.
AMP plans to release from its banking operations about $500 million in capital it has been required to hold to satisfy regulators. This is in line with AMP's global agenda to increase its return on capital and shore up its UK Financial Services operations.
Late last year AMP offloaded its credit card business to American Express and has since transferred its UK bank to Newcastle (UK) Building Society.
While AMP will still offer deposits and mortgages in Australia in addition to its financial planning operations, it will run the bank on a much reduced capital base to enhance returns.
The planned capital release will also be aided by outsourcing some banking functions.
AMP's asset disposal program is now likely to now turn to its discontinued former reinsurance and commercial insurance businesses. They are in run-off, ie, no longer selling insurance policies.
The businesses include Cobalt, a service provider to the reinsurance industry, and Gordian, largely the former GIO reinsurance portfolio that was put into run-off following disastrous losses uncovered in the wake of AMP's takeover of GIO in 1998-99.
The general insurance operations, while supposedly idle, still managed to generate a net profit of $61 million in 2002 as the run-off continues.
An exit from the discontinued operations, say by transferring the portfolio to a reinsurance specialist, could release about $455 million in capital.
Given the asset sales have been well flagged, there was little share price reaction. AMP rose 9c to $7.36. Analysts remain concerned that the UK business and to some extent the Australian financial services operations will be hurt by continued poor fund inflows.
AMP is also in discussions to sell its $490 million rural property finance book, probably to a rural lender such as Rabobank.
The sale of AMP's 50 per cent of the Virgin Money joint venture is expected to be a slower process, given the lack of obvious buyers and despite public statements by Sir Richard Branson last year that he would be prepared to buy out AMP.
For HSBC, one of the world's biggest banks, the purchase is another sign of the group's commitment to the region amid talk that it is a likely buyer, if allowed, of an Australian bank.
GE Commercial's Australasian chief executive, Steven Sargent, said GE's portfolio would grow to $4.5 billion as a result of its acquisition.
© 2003 Sydney Morning Herald