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Why Citibank just slashed their price target on AMP

We examine why Citibank analysts remain bearish on AMP’s prospects.

In a note released on Monday, Citibank analysts revealed they had lowered their price target on AMP, citing increased bank provisions and weaker deal flow as the core reasons.

Although AMP has tried to drum-up enthusiasm around its latest transformational strategy in recent times – which aims to make the company into a 'client-led, simpler, growth-oriented business’; if price action is anything to go by, investors remain sceptical.

Since that revamped strategic focus was announced in August of last year, the AMP share price has fallen close to 30%. If the market hasn’t bought into AMP’s latest plan, Citi analysts appear even less convinced, saying that the firm’s ‘earnings profile remains lacklustre (especially including actual rather than normalised investment earnings) and the transition likely remains long and arduous.’

In step with such a view, Citi analysts today made significant revisions to their core earnings per share (EPS) estimates for AMP. The financial firm's FY20 core EPS is now forecast to come in at 9.0 cents, FY21 at 9.9 cents, and FY22 at 11.6 cents.

A lacklustre outlook indeed!

AMP share price: the all-important AMP Life deal

Beyond the earnings outlook, concerns around timing still remain over the much-hyped and once-stalled sale of AMP Life.

In the broad strokes, this is a deal that has been framed as one critical for AMP’s long-term success. Valued at $3.0 billion, the sale of AMP life would see AMP walk away with $2.5 billion in cash as well as a $500 million equity stake in the hopefully soon-to-be Resolution Life-owned AMP Life.

Most recently, AMP noted that the sale was still on track to be completed by 30 June, 2020. Citibank though, appears decisively more sceptical than AMP management, saying:

‘There appears risk that in the current situation, regulators may have other priorities and be unable to complete the necessary work in time for the planned deadline.’

In line with all of this, the investment bank currently has a Sell/High Risk rating and a 12-month price target of $1.40 per share (down from $1.70) on AMP.

Elsewhere, AMP told investor that its client remediation program was tracking according to plan and is currently expected to be fully complete by 2021.

As of 3:46 AEDT, the AMP share price traded around the $1.40 per share mark.

How to trade AMP

Do you agree with Citi or do you think they've missed the mark here? Whatever your opinion, you can use CFDs to trade AMP and other financial stocks – LONG or SHORT through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) AMP using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter 'AMP' in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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