Amp Ltd

Good morning everyone and welcome to AMP's half-year results today. Very pleased to have Blair Vernon with me here today. He's our new CFO as you're aware, but someone who has worked with AMP for many years and is very passionate about making sure we build a future for the company. Before we start today's presentation, I would like to acknowledge the traditional owners of the land on which we hold this meeting today, 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 in this important time for First Nations people. So today we are of course going to do an overview of the first half results. We will then deep dive into the individual business units with a particular focus on costs and capital, which I know is something you're all going to be wanting to hear about before we summarise the results and turn to questions. So if I look at our results for the half year, We delivered an underlying NPAT of $112 million, which is flat with the same time last year, but up on the second half last year. Pleasingly, the underlying result certainly demonstrates better performance in our operating businesses. I want to remind you we've delivered $610 million of returned capital to our shareholders over the last 12 months. And with the declaration of a two and a half cents dividend today, franked 20%, that will deliver another 70 million in September. And we're committed to completing the second tranche of the buyback by October, depending on volumes. So that's 750 million of shareholder capital will return by October of this year. We also, as part of our capital and liquidity review, have paid down $300 million of debt in July, which is important as we deleverage the organisation, and we're committed to paying further debt down at the end of this year and into next year. Our EPS has improved to 3.8 cents per share, and for us that is a great result and something we want to continue going forward. We have in these results taken a provision for the bowler class action of 50 million. That 50 million represents our best estimate of the judgment as we sit here today and understand it. There is further work to be done here and of course we reserve our right to appeal. But I want to remind you, we only just put our orders in yesterday and don't have the final orders from the judgment yet. As a result of that uncertainty around the litigation, we have today made a decision to pause the third tranche of the capital return, being $350 million. Now, I do want to stress the word pause here, because our second tranche will continue into October. We will, in that period when we're pausing that tranche, make a commitment to no material M&A. And I say that again, no material M&A. And we'll come back to the market on our position on the capital return by the end of the year, by no later than the end of the year. Today we also, as we promised, announced a cost review program with $120 million taken out over the next two years. That's $60.24 million and $60.25 million with a one-off investment of $120 to $150 million. And we expect those costs out to be in the area of IT, continued focus on advice, master trust re-platforming, and of course focusing on the group and stranded costs that have come through from the transactions. This result is delivered in a market condition that's interesting. We're still in an environment of higher inflation and interest rates, albeit that appears to be abating. But we're well positioned. Our bank is well capitalised. We have a good credit quality in the book. And whilst there has been a small uptick in arrears, it's nothing that I remain concerned about and we are well provisioned. Our LVR and our dynamic basis are at 53% as we stand here today. Having said that, we know that some of our customers are experiencing hardship and we're well placed to be able to cater for their needs in the coming months. If I look at our platform business, it is being impacted by some of the environment I just talked about, particularly in relation to our IDPS environment and our cash flows. But we have to remain focused on the longer term around retirement solutions where they're particularly strong. The regulatory environment is as positive as it's been for a company like ours. The government is now committed to implementing parts of the quality advice review, at least the first stream which relates to our traditional financial advisors and the second stream which would allow superannuation to provide further advice to customers. For us, with our footprint, that is a definite bonus. On the first stream, it relieves some of that compliance burden for our financial advisors which should allow them to see new clients again and bring more flows into the industry. And secondly, on the superannuation, we're clearly a company focused on retirement and super, and being able to give better advice to our customers to enable them to have a richer retirement will be important. On the unquestionably strong, our capital ratios in the bank remain incredibly strong, and we're very much playing in that retirement stream that we've heard our regulators talk about recently. If we move to a progress on our strategy for the first half of 23, and this strategy is no surprise to you. On reposition, we want to grow our bank and grow our platforms. We have grown the bank at 1.1 times system for the first six months. I do want to stress, though, the market remains competitive. We've taken a very prudent approach to growth, making sure we deliver return on capital. So while we want to continue to grow, it is important that we make sure we deliver return on capital. In the north platform, while the flows have come off from the same half last year, we continue to grow the IFA footprint, which is incredibly important for us, and it's up 48% from the same time last year. And with our new retirement solutions, we continue to push on that front. New Zealand, stable results as they have delivered for several years, and they just need to keep delivering on those stable results. And in our Master Trust business, while the flows have reduced or the net cash flows out have reduced, it's a point in time where we need to rethink the platform there so we can engage better with customers in terms of digital and education. On the Simplify, we have largely dealt with the AMP capital sales and super concepts in the half. And that really gives us free air to be able to focus on the future. We continue to drive efficiency in our advice businesses, making sure we can focus on those services that our advisors want and are willing to pay for. We have committed today to cost reductions, and we continue to focus on those costs, the stranded costs from the transactions, the group costs that were fit for an organisation of the past, and we're absolutely committed to delivering on that. We have delivered shareholder returns in terms of capital and will continue to focus on that, making sure though that we are prudent in relation to our capital and liquidity. And we continue to resolve those legacy issues, working through them methodically and rationally. On the explore side, we continue to invest in our digital and customer interactions to make sure we're well positioned for the future. We also continue to build on that leading position in retirement, and we've won so many awards in that space that I remain incredibly proud of. And we want to continue to grow those platform businesses and the bank business and examine all propositions for advice. And you've heard me say before, we need to consider all propositions for advice, but they need to be viable propositions, not just for AMP, but for our advice partners, who are an incredibly important stakeholder for us. If I look at our stakeholders, shareholders always remain top of mind, but there are other players that we need to make sure are being met in terms of needs. On the customers, we've paid out over a billion in retirement. We've delivered over 4,000 new home loans. We're being proactive for those customers who are experiencing hard times at the moment. And our My North solutions in terms of retirement have won many, many innovation awards, and we're all very proud of that. On people, we have been going through massive transformation over the last couple of years, but our engagement remains above 70. Would I like it to be higher? Absolutely. But I think given the changes we've been going through, that is something that should be noticed. And our trust and NPS with our advisor partners is improving and continues to improve. On communities, our AMP Foundation, which is a very large foundation, as part of its 30th year anniversary this year, was able to deliver two $1 million grants to Global Sisters and the First Australian Capitals to do good work in the community. And coming back to our shareholders, we very much listened to your feedback at the full year about making sure there's alignment between executive performance and shareholder outcomes. And we've taken a good hard look at our performance framework and at our outcomes and reviewed those to make sure there is that greater alignment. And they're included today in our financial packs. So on that note, I will pass it through to Blair to walk through the detailed financial results.

Thanks, Lex. It's a pleasure to be here. I'm going to just recap an overview of some of the group numbers. As Lex mentioned, then I'm going to focus on the individual operating business units and a bit of a deep dive in each of those. I particularly want to talk about cost and capital. As Lex has mentioned, they were particular focus areas for us based on feedback, but also our own agenda of work in the first half of this year. So just turning to the group overview, as Lex mentioned, an impact underlying of $112 million, square, half on half, but pleasingly the operating business units carried more of the weight during that period as we saw some decline in terms of our sponsor returns, and I'll talk to that a little bit later. AUM revenue is obviously a little softer based on the overall mix and particularly margin, but that's an area we continue to focus on. Interest expense did rise during the period. Again, as Lex has mentioned, that corporate debt repayment will improve that as we look into the second half. And our focus on controllable costs continues. So we are broadly flat in the half. That's after absorbing quite a significant amount of inflation and some of those stranded costs that we've talked about a number of times in terms of the sale activity. And that continues to be a focus for us. Broadly speaking, though, from a half and half point of view, I think $112 million is certainly something we're very proud of. If I turn now just to the operating business unit overview at a high level, importantly, I think we want to focus on making sure we're clear about performance focus across all of these business units. As Lex has mentioned, AMP Bank and platforms are clearly a key growth area for us. We want to continue to focus on margin management of the bank in terms of NIM, but also margins across our platform businesses, acknowledging that we've got some subdued cash flows. I think importantly for me, the cost of income performance in those two businesses is really positive and obviously the half-on-half profit uplift is a positive story for us. That performance focus will continue as we absorb cost increases naturally in those businesses and look to preserve those cost of income performances. Again, as Lex mentioned, New Zealand Wealth Management are flat on the half in an environment of higher inflation in that market and we would look to continue that kind of performance and that kind of cost of income outcome that we see in that business unit. For Master Trust and Advice, that is an area of key improvement for us. While the Master Trust cost of income starts in this period at 67%, we expect to see improvements in that area as we roll out our cost and simplification program. Again, as Lex mentioned, we've improved the advice performance, but that continues to be an area of focus for us. And in our new template this year, apart from those five operating business units, we've obviously now consolidated into a group performance as we take into account our strategic partnerships and the other retained interests from our AMP capital sales and offset that against other items that we're holding at group. And that's principally some of the stranded costs that we see around the property and legacy technology as a result of the substantial changes in the group over the last few years. Just turning to items below NPAT, and that does continue to be a significant feature for us in the first half, as you would naturally expect given the sale activity and the number of one-off items. Just picking up a couple of points, again, in terms of litigation and remediation, as Lex mentioned, we've taken that provision in the first half. You can see that coming through in that cost. Transformation cost out continues. That's the conclusion of our three-year program. And so that continues this half, and I'll talk a little more in terms of our guidance about how we see the second half. But that does represent the completion of a substantial phase of transformation. We'll talk more about the cost out as we look into future years. Importantly, in other items, that largely comprises the gains on our sale activity, a substantial first half for us in terms of both the AMP capital divestments, two separate transactions, and also the super concepts transaction, which we've already identified has caused us to rebase our cost position so that we've got a comparable half on half. So an impact at a statutory level of $261 million overall. Just a couple of further comments in terms of that overall. As I mentioned earlier, that flat position and impact, I think, does talk to the operating business units carrying more of that burden. Pleasingly, bank revenue was up, and that offsets sponsor valuation movements, which post-tax are down $16 million on the half. And so it throws five operating business units have performed very well through this period. I think an area that we obviously continue to focus on is the subdued cash flows and we've highlighted that in our reporting. I'll talk to that a little more in a moment. Importantly, I think as we look into that, the important element for us is to really be mindful of margin management across our AUM businesses and our existing performance in terms of stocks. So retention is also a key focus for us as much as we continue to focus on improving that net cash flow position. Just turning now then to the operating business units in a little more detail. AMP Bank, particularly pleasing in terms of an impact improvement of nearly 24%. Obviously improved mortgage book growth, as Lex mentioned, slightly above system and appropriately less than we were originally targeting given the intense competition in that market. The cost-to-income ratio continues to improve, and we think that's very important, acknowledging we've got some NIM compression in this period, and we see that continuing to be an area of focus. Our strong cost-to-income position gives us a good performance basis to start from in this segment. For me, importantly, the funding is key in this business. Pleasingly, more than half of our customer deposits are acquired by digital channels, and that continues to be a significant focus for us. And as Lex mentioned, our view on the book and arrears continues to be an intense focus. We've seen some uplift in 90-day arrears, but we've got a really important focus in terms of curing those situations, particularly as they emerge in the 30-day numbers. And just turning to some of those details, you can see that uplift in the 30- and 90-day numbers. Pleasingly, we're seeing an improvement in those 30-day numbers as we look through and particular focus on helping customers in that early stage of the intervention. As I mentioned, the cost of income, we think, certainly compares favourably to our regional peers. And a big focus for us is obviously balancing that growth focus with our return on capital, mindful of meeting those expected benchmarks and continuing to focus on that. Just turn to platforms. As I mentioned, impact up 25% or just a little over. That's larger result of improvement in the north guarantee. So that's that's a pleasing feature. This half offset obviously by subdued cash flows 741 million x of the pension payments. And when we include pension payments, a slight negative and a half that will continue to be a focus on a forest but I think reflects some of the wider industry dynamic around subdued cash flows as well. Pleasingly, as again, as Lex mentioned, we're really focused on extending our footprint, not just from our very valued relationship with our aligned advisors, but extending that north platform offer into the IFA market. And obviously, our income product has been significant in that, but also our managed portfolios, which now are exceeding $10 billion through this half, which is very pleasing. Just on platforms in a little more detail, the mix we see in terms of our business is more weighted towards superannuation and pension. We think that gives us some positive momentum going forward as we think about the momentum of flows, and particularly the more investment-orientated flows, which may not be coming onto platforms more generally, and we've certainly seen that in our case. Overall, that push into IFAs continues to be improving half and half, as I mentioned, and that will continue to be a focus for us as we open up more IFA opportunities through our north offer, which the team are very focused on. Just turning to New Zealand briefly, main focus for New Zealand in this half has been the continued diversification of revenue streams. That's important in that market given the focus on looking to extend beyond just the KiwiSaver footprint. The core KiwiSaver product though has started to see some positive cash flow and importantly positive member movement, which has been important. That acquisition we completed in this half of a business called EnableMe allows us to extend that fee-based coaching revenue model, which is very positive, and that's a key opportunity for us in the New Zealand business. We've also continued to simplify the New Zealand business as we move forward, so we divested a small legacy book. That has some margin impact on us, but we think significantly de-risks the portfolio as we look forward. Turning to Master Trust, a very pleasing performance in this half. MPAT improved slightly, and margins, while they were impacted by some of our simplification, we think that continues to reflect our focus on improving and simplifying our offer to customers. We think that that will be a key feature going forward, and that obviously features in our cost out program as we look forward, so we'll talk about that in a little moment. Importantly, net cash flows are continuing to improve in terms of outflows. It is important to recognise, though, that the previously announced mandate loss has now concluded, and so this past weekend, $4.3 billion of outflow will obviously reflect in our second-half results. Pleasingly, that cost of income has improved, and that will be a key area of focus for us, as I said, in terms of our drive for performance in this business as we not only replatform but look at our offer overall. Now I turn to advice, an area that we've again been focused on in the last few years. You'll see we've continued to improve our impact performance, obviously posting a loss still, but the team remain very focused on balancing our improving cost position by making sure we deliver services that are valued by our advisors, as well as looking to support our advice network as they go through and continue to go through substantial change. Pleasingly, our revenue per practice continues to be very strong. And our position in terms of scaled practices relative to the market, we think positions us very strongly in terms of the upcoming changes in the advice market, as Lex mentioned, and a really strong advisor franchise that we continue to work very closely with. At a group level, as I mentioned earlier, we've obviously made substantial changes to the way we report here. Our strategic partnerships did see a reduction in this half based on sponsor movements. That was 20 million pre-tax, 16 post-tax, as I mentioned. Pleasingly, our partnerships in China, CLPC and CLAMP, continue to deliver in line with expectations. The important thing for me in terms of this group position is really opening the jaws between that impact from the partnerships and continuing to reduce the costs. And that's both in terms of tax expense, but mostly in terms of the stranded costs. And that's principally around technology, but also some of the property-related costs that we've naturally seen stranded as we're starting to complete now and finish the separation of the AP Capital businesses. Just turning to costs, particularly, given that's been a significant area of focus for us in the first half. In terms of FY23, we've closed the half at $362 million. That's comparable to the prior half, and naturally we've rebased the 22 numbers to account for that super concepts exit. We're forecasting for the second half a landing zone somewhere in the region of $380 to $390 million. So that's an improvement on the second half last year. That would see us landing in a range of $745 to $755 million of controllable costs, which is slightly better than the comparable last year and certainly in line with how it guided the market. And we'll continue to focus on improving that right through the second half. Importantly, for 2024 and 2025, We're announcing today a further program of business simplification. We expect that will deliver $120 million of cost out over that FY24 and 25 years. Broadly, we see that being roughly equal across those years, so $60 million out across each of them. We see ourselves delivering that inside the envelope of absorbing cost uplift as well, and so we think that's a significant improvement. Broadly speaking, if we look at our forecast, that would see us improving our cost-to-income ratio into the low 60s, which we think is a good position to be in. As we mentioned, we think that's going to require us a one-off investment spend in the region of $120 to $150 million, again, over those two years. We see that really landing in three core areas, and we're going to very tightly focus in terms of that spend. The first is what I would call core basics, so this ongoing simplification that we continue to drive through the business, and a particular focus on project spend and investment-driving outcomes. The second is what I would broadly call solutions. As Lex mentioned, we're now at a point where we can turn our mind to the sort of central replatforming of the master trust business, particularly the technology, which is tying up significant complexity and cost for us. Equally, we know that the advice business continues to have a cost base that doesn't match the revenue profile, self-evident in terms of the results over the last few years. Certainly not a reflection of the work we're doing because we're continuing to improve that performance, but we're looking for further step change as we look forward to that break-even position by FY24 and consider what are the future positions in terms of advice models. So that will require investment. Thirdly, the area of stranded costs. We clearly have a group technology platform that is configured for a much more complex business than we are today, and so that requires right-sizing, but it will require investment. And similarly, property and corporate contracts, that'll be a continued work on for us as we look to compress all of those costs to better match the organisation that we are today and the simplicity of what we expect going forward. Turning now to capital, We have laid out here our position in terms of target capital as we finish the half and broadly speaking that target capital position has decreased and that's a reflection of some uplift in minimum regulatory requirements as you would expect relative to growth in those businesses, particularly bank but also regulatory requirements. We've seen a board buffer decline as we continue to simplify our business and the board becomes more comfortable about the buffer required to deal with unknowns. That's come down as a result of the anti-capital sales significantly. That leaves us with a surplus capital position, and I just want to step through exactly where that surplus capital bridge is from where we got to at FY22 and where we are now. So we closed FY22 at 9.23. You can see the stat MPAT uplifts. We've obviously, as Lex has mentioned, been conducting buybacks, dividends. We've got some net business activity movements. That reduction in board target, you can see, leaves us with $9.88 million at the half. But importantly, we've already flagged today our dividend and also remaining share buybacks, which would give us a pro-form position of around $848 million. Importantly, our view, as Lex again has mentioned, is to take a very cautious and careful approach to that position, hence the pausing of the capital return, but we stress the point pause. And that will be a focus for us as we look into H2. Just turning to H2 and activity we've already got underway, we mentioned and committed to our capital review during the half that's been completed and engaged with stakeholders. That's already seen us take action, and that particularly relates to the pay down of corporate debt, which we mentioned at the outset. That's $302 million of reduction, so that's obviously come off that cash position at 1H23. The important thing for us is continuing to make sure that capital is all available, so we've got a lot of work ongoing as we continue to simplify the legal entity structure in terms of the operational footprint of the business. And obviously we'll continue to review the right time in terms of the approach there. Just to recap that capital return program, by the time we complete that dividend and the remaining tranche two, that'll bring us to that $750 million of commitment. We expect that to be October based on volumes around the buyback. And as Lex has mentioned, we'll be back to the market before the end of the year to update on tranche three. Now, just turning to a view on guidance for the remainder of the year, I just want to step through the key elements. In terms of bank, we continue to target above system growth, although we would expect, given the competitive environment, that would be similar to our position in H1. Our view on NIM is that there will be some slight compression based on where we finish the half, and so we're expecting a landing range somewhere in the 130 to 135 basis point range. On platforms, we do see continued subdued cash flows. You would expect cash flows to be similar to H1. Big focus for us, though, is margin management, and we do expect that to be broadly in line with our position, so around the 48 basis points. On Master Trust, similarly, we're expecting steady margins, so around that 63 basis point level. As I mentioned earlier, we have seen that outflow of that substantial mandate that's now complete. And we are seeing, we have an expectation that there will be some slightly higher cost in Master Trust. There were some timing differences in terms of the way our technology spend for required technology upgrades occurred in Master Trust, and so there will be a little more uplift in the second half. For advice, the focus continues in terms of that cost-out activity and continuing our operational improvement and delivering services that advisors value. So we would expect to see some continued efficiency improvements in advice. On controllable costs, setting aside our forecast for 24 and 25, just for 23, we will expect to see that landing zone 745, 755, as I mentioned, that compares favourably with our rebased FY22. We will see some below-the-line costs come through, as we've previously noted. That's the completion of that transformation program I talked about, as well as the finalisation of the separation activity of the range of transactions that were in the concluding stages of separating. So we expect that to be in the region of $45 million post-tax. And just on strategic partnerships, now that we've reset the way we report on that, we would expect the strategic partnerships component to deliver us in the region of a 10% per annum return on investment. That's our anticipation. The balance of retained interest that we have in that portfolio X of the AMP Capital business obviously will be subject to market movements. With that, I'll hand back to Lex for a summary.

Thank you very much, Blair. right let's move to the second half focus and as you would expect no surprises here if i talk about our reposition pillar we want to focus on growing the bank in a disciplined manner and it's a very competitive market at the moment both for funding and for mortgages and we need to remain focused on that return on capital In our platforms business, we want to continue to grow and manage portfolios and continue to leverage off the innovation awards we run in our retirement solutions and grow that IFA network as well as respecting our line network. And of course, we've got to focus on those advice costs that don't deliver value for our advisor partners. We've been doing that for some time now, but that work will continue in the second half of this year. If I look at Simplify, we've talked about the cost base today. As we move through the second half, we need to set ourselves up for those cost reductions we've committed to today through 24 and 25, and we have a good plan there to achieve that. I want to make sure we continue to deleverage the balance sheet. As Blair has mentioned before, we've already paid that $300 million. There's more to come in the second half and into the first quarter of next year in these higher interest rate environments. We've talked about preservation of capital and I'll say it again, it is important that we preserve capital, we manage it prudently and we'll continue to do that and make sure we come back to our shareholders no later than the end of the year about that third trench of capital. If I look at our explore function, again no surprises. Continue to develop innovative solutions in that retirement space where we have a natural advantage. We are going to continue to work on those proposals for advice and we're working with our advice partners now and discussing with them some different ideas. But as I've said, it needs to be viable from a financial perspective, not just for AMP, but for our advice partners as well. So if I just take a minute to summarise the results as I see them. I think we're making progress against the commitments we've made to our shareholders. We have largely dealt with the sale of AMP capital and super concepts. We've delivered shareholder return of capital of $610 million with a further commitment of $140 million by October in terms of the dividend and remaining buyback. We've commenced delivering the outcomes of the capital and cost review. deleveraging, making sure we can deal with the liquidity and the many legal entities we have and looking at the opportunity pay down for the debt. We are dealing with our legacy issues and we have had legacy issues to deal with but we work through them methodically and rationally. There's certainly headwinds as we move through 23 and 24, but I think we've laid down a good strategy today to deal with those headwinds in terms of cost, in terms of capital, and in terms of liquidity. So if I stand here today and look forward, I think our core businesses are much better positioned. We have largely a portfolio that we want to take into the future. We're dealing with those historical issues and we certainly as an executive are very much focused on performance into the next generation. So thank you and I'll now turn to the operator for questions.

Thank you. If you'd like to ask a question via the phones, you'll need to press the star key followed by the number one on your telephone keypad. To cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Kieran Chidji from Jarden. Please go ahead.

Morning, guys. A couple of questions starting on capital. The 850 mil surplus is obviously post this additional pilot provision you put in place. So just wondering if you can sort of talk to a greater extent, why you felt the need to port that 350 north third trench, and what gives you confidence that you will be in the position by December to have greater clarity on potentially resuming that?

Yeah, thanks for the question, Kieran. If I can just come back to where we're at in terms of the litigation at the moment. In fact, just yesterday, we put in our orders in relation to the bowler class action, and that was in response to the plaintiff's orders. We expect that the judge may make some final orders by the end of this month and then of course we'll make a decision about whether we're going to appeal that or not. And similarly you have further litigations coming with the shareholder class action. So we felt it was prudent at this time to pause that third tranche of capital until we get greater clarity around those litigations. Why do I expect that we'll get something this year? For all the reasons I just said, we'll have a better picture on whether we will or won't appeal. We'll have the judge's orders and we'll have largely gone through the shareholder class action. I just want to come back to the point that the second trench of capital will take till the end of October, we think, on current volumes as well. So we're only talking about a two-month period.

Thanks. And Alexis, I think sort of around the AGM, you'd flag the prospect of potential increases to the 1.1 Bell capital return program, which would mean going more heavily to that surplus capital position. Is that still on the cards over the medium term?

Yeah, Kieran, we'll have another look at that at the full year because you've rightly pointed out we have $850 million surplus as we stand today. I want to stress we've also kind of made a commitment to continuing dividend payments subject to the board approval, of course, but that's going to round out at about $70.5 as well if we continue on the current trajectory. But we'll have another good look at that at the full year.

Okay, thanks. And a second question on the cost our program announced today. which is sort of 120 mil or 16% of your cost base. Can you give us just clarity around the timing of that? So you're saying in the year FY25, you'll have the full benefit of that and so we don't need to worry about BAU inflation. It's just sort of your controllable cost base in that year is 120 mil lower than what it is in 23. Is that the way to think about it?

That's the way we're looking at it. So it would be $60 million out through the 24-year and $60 million out through the 25-year net. So that is net of inflation. Clearly, we have had to be working on the 24 already to ensure that we can deliver that in that period.

Okay. And which divisions does that sit across?

As we said, there's a combination here. There's really tackling those stranded costs that we've earned from the AMP capital transactions. It's focused on the group costs that don't add value to any of our customers. And then it's a combination of continuing in advice and the master trust re-platforming that we've talked about today. Any other comments for that?

Yeah, I'd look at that slide I tabled in terms of grow, continue, improve care and the improve area is clearly where we see that. And the big lock up there is really the technology componentry and so that's a key one. But naturally other things like property self-evidently are opportunities for us as well. That's the big area of focus. In the other areas, in bank and platforms, the desire would be to hold costs flat. Certainly through next year, that's our focus. But that sees them absorbing substantial inflation impacts and also driving their investment programs. So that's no mean feat considering the inflation environment.

Thanks. So I just had one quick last question. I want a clarification. So the BankNEM guidance of... for the full year, given you had 1.39 in first half, seems to imply second half between 120, 130, which is quite a sharp reduction relative to what you've done this half and would imply an ROE maybe at 8% or even below. So I just wonder, is that correct? And if it is correct, why are you aiming to grow above system at that sort of ROE?

Do you want to comment on that?

Yeah, so your view on mass on the spots is right, and clearly that's an area of focus and improvement for us, Kieran. So we'll balance that aspiration for growth with the sensible balance of return on capital and preserving NIMS. So while our goal is to grow above system, if that doesn't make sense from a return on capital and a margin point of view, then clearly we'll manage accordingly. you know, focusing on return on capital and preserving them and delivering performance in the bank is critical for Sean and the team. So, you know, they're managing that on a daily basis.

Yeah, I would stress that. I mean, obviously we'd like to grow above system, but it doesn't make sense from return on capital. We won't be doing it. And I think it's an incredibly competitive market on both sides of the balance sheet, both on the mortgage side, which has been for some time, but the funding side particularly at the moment.

Thanks, guys.

Thank you, Karen. Operator, is there another question?

Thank you. Your next question comes from Lafatani Sotirio from MST. Please go ahead.

Good morning, and a few questions from me, if I may. Kicking off with a follow-up on the cost-out program. Can you clarify, is achieving the $120 million cost-out contingent on... of finding a solution for the proposals you're receiving in relation to advice? Or if you do have a solution for a viable option in advice, would there be a further net benefit to the $120,000 that's on the table?

Yeah, getting to the 120 does mean that we need to get to a break-even position for advice, which we've made commitments to many times, and we've always said that that's a challenging environment, so it does require us to get to that, Kieran. Sorry, laugh. Regardless of the proposal, that would be included within the 120. I don't really see that there would be much upside on that.

Got it, got it. And can I just circle to the excess capital position, $850 million-odd net of tranche two and net of the provision taken for BOLA. Can you just clarify, does that number include the pending payments to things such as the excess $50 million that's deferred? Or I believe previously there was some seed capital that was not included in that figure. and also some carried interest amount. So can you just clarify what else may be in the background that may realign in the next year or so?

I'll ask Blair to comment on that, but those amounts are excluded largely.

Yeah, consistent with our conservative view, Lef, we haven't included the $15 million subsequent payment in terms of the DEXA transaction or the carry components. And so, you know, again, we would aim for continued upside so that we think that's a positive, but it's not factored into those numbers at the moment.

I do want to stress that carry, whether it's seed and sponsor or investments, does depend on the market movement. So it is quite volatile, as you know, which is why we don't typically include it in any of our projections.

No, I understand. I just wanted to make sure how we should factor that in. But I think there's also one thing that was There's still one performance fee, sorry, earn out you could still realistically get was this digital breach. I think there was up to $180 million for the global infrastructure equity. Can you provide an update on how that's tracking or whether there's any realistic prospect of getting any of that?

Yes, Laf, you're right. That hasn't been included. I think given the volatility of the market at the moment, I think that's the right thing to do as well. I would expect we might get some of that back, but whether it's right to that value would be questionable. And, you know, it's still years out.

I think that's the key thing. There's a fair timeline to work there and obviously dependent on the way those funds close. So, you know, we'll continue to work closely with those parties. We've obviously got a keen interest in it, but, you know, we're taking a cautious view.

That's fair enough. So the $850 million is really a pretty... conservative base case, and given there's these other items in the background, would you still elaborate a little bit more on the pause? You know, 850 is a significant bucket, and could you add a little bit more colour, I guess, to, was it a board decision, and any confidence around why you have... Do you only see it as a pause and have confidence that it will resume, I guess, later in the year?

Yeah. Of course, any decision like this goes to the board, but it's a decision that the whole executive would support as well. I think given the uncertainty around those litigations that we've talked about, we really think it was the prudent thing to do to preserve capital at this point. And given that we had that share buyback going through to October, it really does deliver on the commitments that we've continued. So... We are comfortable to be able to come back to the market by the end of the year. As you heard me say, we've made commitment to no major M&A during that time because I think preservation of capital is absolutely critical. But we'll come back to the market by the end of the year. We just think it was a prudent thing to do given we don't have a lot of clarity around those litigations.

Okay, got it. And just one final question for me. Can I just clarify the debt repayment of $302 million? I think at the last result you talked to repaying a hybrid, but it looks like this is separate to the hybrid repayment, and you've also put on the table further debt repayments. Could you just reconcile these moving pieces for me so I'm not double counting, or is it really net new $302 million debt repayment?

Sure. Do you want to go through that?

Yeah, Lef. Yes, that's separate. And so that repayment is separate to the hybrid. We're continuing to look at, you know, what else we should be thinking about in terms of debt repayment over the next six to 12 months. We've got some items coming due. But equally, as Lex mentioned, that broader deleveraging was an element that was confirmed in our capital review. That's why we've taken immediate action. Obviously, it makes sense from a P&L point of view as well because it'll substantially reduce our debt costs in the second half, which I think is a positive as well.

Yeah, I've got that. I think you've got $251 million due. Is that what you're referring to as you still have further intentions to repay debt?

That's right. That's right, Les.

Yep, okay, excellent. Thank you.

Thank you. Are there any further questions, operator?

Yes, thank you. Once again, if you'd like to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Simon Fitzgerald from Jefferies. Please go ahead.

Hi there. Just the first question around the $50 million. Hi there, how are you? Thank you for taking my questions. Just the first bit around the $50 million that you're putting aside for the bowl of hostility class action, just interested to know whether that's been a top-down or bottom-up approach. And I'm sorry, but if you had that number ordered, because I know you only just recently came up with it, but...

Yes, thanks for the question. Yes we have had it audited and that $50 million provision is based on the best estimate of the judgment as we understand it today and it's a very complex process to go through from an accounting standard perspective which we've done with our auditors. So it's been audited It's been verified by them, and that's how we got to the number. I'm not sure if I'd call it top-down or bottom-up, but it certainly was based on an estimate of the judgment.

Okay, very helpful. Then just on the cost savings, interested to know just in terms of your level of retention, I know that there's obviously some one-off costs that go against that. You mentioned it's net of inflation, but interested to know in terms of how much might be preserved for pricing changes. So I guess I'm trying to think about how much of that should work its way to net benefit.

I mean, that number that we're talking about there is net controllable costs. I mean, there's been some pressure on margin across the businesses, particularly the wealth businesses, but we've been able to offset a lot of that margin decline with variable cost decline at the same time by working harder with our investment managers. So I'd expect to see most of that controllable cost drop through to the bottom line.

Yeah, I'd just echo that. That draws is key for us. Margin management will be a key focus for us, as will retention and just driving revenue. We want that 120 to hit the controllable cost line over that period, so by the end of FY25, and fundamentally drive that continued improvement in performance.

That's helpful. And then my final question just relates to the margin and the master trust business. I know that you've mentioned that it's going to be stable. The Woolworths mandate that goes out for $4.3 billion, that would have been quite a low margin. I'm just trying to understand a little bit about the impact of that mandate, you know, the stability of that margin.

Yes, you are correct. Given the size of the mandate, that was a lower margin business, and we have been planning for that mandate to exit for some time now, so we've been able to offset it with some cost reductions that will come through at the same time. I do want to stress that we expect our Master Trust business, because of projects and because of variable spend, to be a higher cost environment in the second half, but I don't think there will be largely any impact on the margin.

No, I mean, there's always some movement in terms of mix and so forth. So even in the first half, you can see we simplified some investment menus that drove some mix change and slight compression, but certainly our view is steady in the second half. A big focus for us, obviously, is matching that cost save to match that mandate outflow, and we've been doing work proactively on that. But there's also a point where you can only recover some of that cost and simplify once the actual SFT is complete, and obviously that was last weekend.

I'm sorry, just one more further question on the bank, if I could. You know, obviously, beers are starting to tick up in both buckets there. Just interested to know if there's any trends that you've been able to isolate there or anything that sort of draws your attention.

Yeah, I make a few comments. Firstly, the 30-day trend has abated in the last couple of months in that we're seeing some early curing of the customers, mainly due to early interventions. So that line has abated. I think when we look at our 90-day arrears, yeah, it's about where the market's at. And interestingly, the reasons for the 90-day arrears aren't typically any different to the normal reasons. It's just a different economic environment. So it's loss of job, family circumstances, same kind of situation. But clearly there are some hardships out there, but, you know, I don't think there's anything abnormal in that.

OK, that's helpful. Thank you.

Thank you. Operator, is there any further questions?

Thank you. Your next question comes from Nigel Pitaway from Citi. Please go ahead.

Good morning. First of all, just a question. On the breakeven target for advice, does that now effectively envisage that some of those opportunities that you're exploring to accelerate the pathway to profitability that you mentioned on slide 33 are actually successful, or do you still think you can make a go of it even in the sort of current structure?

Yeah, I mean, we're not walking away from that target to get to break even by the end of 24. We've made that commitment for some time now, and Matt, Laura and the team and I are working very hard on that. I've always said the last few million of that will be quite challenging, and that's no different today. But, you know, that commitment stands.

Right. So, I mean, I guess in the context of one of your competitors, you know, sort of changing the structure, obviously you've had the issues with the bowler case and the like. I mean, you know, you still feel that, you know, not changing the structure, you can still make that break-even target. Yeah.

Yeah, as I said, I'm certainly not walking away from that commitment. We need to have a business that's viable for AMP as well as for our advice partners. But I do want to stress looking at alternative proposals has been on the agenda for us for some time. We want to make sure if we were to go down that road, it was a business that was financially viable for the advisors, not just for AMP. And I think that's critical. You can't create a business that's not viable for our partners either. And that means that needs to be profitable or break even at a minimum.

Okay, thanks for that. Secondly, just on the sort of, obviously you've put resolved legacy issues in the sort of 23 to 25 column, but in the comments you've made about being able to sort of come back on the capital sort of availability, you've obviously flagged that you've got some big ones in terms of the bowler and the class actions, hopefully sort of more resolved by the end of the year. And once you've got to that end of the year, do you think there's sort of, you know, some big ones left? Or is that basically, you know, the end of the major ones? What else is another word for 2024 and 2025?

We do, as you're aware, have four class actions out there. The BOLA class action that we're in the first throes of those judgments. We have the shareholder class action, which is due to commence in a couple of weeks. And then there's two further class actions, which, to be honest, Nigel, are so far away, I don't even understand the boundaries of them at this point.

OK, so those are the main things that have got to be resolved. Yeah. Okay, next question. Just on the sort of growth in the north platform amongst IFOs, I mean, can you maybe comment on how successful you've been in targeting other than ex-AMP advisors in that sort of growth? Has that now sort of broadened out to reach sort of advisors outside those that used to be in the network, or is it still pretty concentrated in those that used to be part of AMP that moved away?

I mean, if I look at our flows today, about 30% is coming from the external ISA market. And maybe if I can just recap, I mean, last year we launched our retirement solutions, which is something that's unique to AMP and really gave us the opportunity to get back out into that open market. and to talk to those advice groups that hadn't or wouldn't talk to us for many years. And now they've really opened the doors, allowed us back onto their APL in terms of having North platform there. And we're really running a huge number of education campaigns around the retirement solutions. So I think there is a genuine opportunity for us there in the non-ex-AMP space. Would I like it to go quicker? Obviously. But I think we are moving forward. The doors are opening. The education is happening. We're starting to see some traction through that retirement solutions. And obviously that's beneficial for North broadly.

Okay, thanks for that. That's helpful. And then maybe just finally, I mean, strategic investments, I mean, disclosure is still a little bit hard to sort of completely get the picture of what's going on. But, I mean, couldn't I maybe just ask, first of all, is TCCP performing in line with expectations? And secondly, when you're sort of calculating the 10% return, what number is the base that you're using for that 10% calculation?

It's still in line with the base.

Yeah, so the PCCP performance is one of the impacts, obviously, in the first half. Not necessarily a huge surprise, given the nature of the business and the property impacts, particularly in the US, where they've got those holdings. But, you know, that's obviously... something that's occurred in this half. When we think about the strategic investments and that 10%, that's across those three investments that we hold and disclose in our reporting, Nigel. So that's CLPC, CLAMP and PCCP. So I sort of distinguish those as the strategic holdings and so that's where we're targeting the 10%. The balance of what falls into that line is, as we mentioned before, all of those other retained interests and carry items, which clearly are much harder to forecast and will have a much longer run in terms of, in some cases, the realisation. And so we just think it's sensible to separate those. So it's the three key holdings that we disclose that we're basing that 10% position on. And again, that's obviously subject to conditions. They're operating in two markets offshore, China and the US. But if we look through the cycles, we see that being broadly a forecastable view.

And that's the balance sheet items of those almost 700, Nigel. But as Blair said, I would exclude the seed and sponsor, the investments in the underlying funds. That's the joint venture assets.

Okay, great. All right, that's clear. Thank you very much. Cheers.

Thank you. Operator, is there any further questions?

There are no further questions at this time.

Well, on that note, I thank you all for your attention today. Thank you, Blair, and I look forward to speaking to you later.