AMP to Launch Bank for Small Business, Flags Margin Pressure

By Alice Uribe

SYDNEY–AMP intends to launch a new banking division targeting sole traders and small business, as the company flags that margins will remain under pressure in fiscal 2024.
The Australian wealth manager on Thursday said that the new digital bank offering would be built in FY 2024 and launch in the first quarter of the following fiscal year. It will operate on a separate technology program.

AMP said it would invest around 60 million dollars (US$39.1 million) across the 2024 and 2025 fiscal years into the small business division, which will be absorbed within current controllable cost targets and of which approximately A$40 million will be capitalized.
AMP expects the division to boost net profit and return on capital for the banking unit from 2027, and said it’s unlikely to affect cost targets.
“This next step in the AMP Bank strategy also aims to lessen funding risks over the medium and longer term, with a focus on continuing to build a sustainable funding base,” AMP said.
AMP will work with Engine by Starling, subsidiary of U.K. digital bank Starling Bank to build the small business division’s platform.
AMP also said the banking unit’s near-term performance would continue to be affected by current market conditions, and expects the fiscal 2023 net interest margin to be around 125 basis points.
At the same time, AMP said NIM will stay under pressure in fiscal 2024, but benefit in the medium and longer term from lower funding costs because the new small business division will diversify AMP Bank’s funding sources.
Still, the company said it expected AMP Bank growth is expected to be nominal in fiscal 2024.
Write to Alice Uribe at alice.uribe@wsj.com