AMP quits banking in NZ

By KEVIN TAYLOR

AMP Banking is pulling out of New Zealand four years after crossing the Tasman and only six weeks after saying it was starting to make money.

The news came just a day after St George bank, Australia's fifth largest, announced it was entering the New Zealand banking market through a joint venture with supermarket giant Foodstuffs.

Sydney-based financial services giant AMP, which hit trouble in recent months with a share price plunge and executive changes at the top, yesterday revealed major restructuring plans and the loss of more than 1000 jobs.

The company's AMP Banking arm was hardest hit, with the withdrawal from New Zealand and sale of its assets here.

AMP will sell its New Zealand property finance and mortgage books, worth $2.7 billion, and its deposit book, totalling about $500 million. AMP was also discussing the sale of its credit card portfolio in Australia and New Zealand with American Express.

Overall, AMP Banking plans to chop most of its 600 banking staff to fewer than 100 employees by the end of next year.

About 70 of the 600 staff are in New Zealand. The bank's Australia and New Zealand head of retail banking, Michael Guggenheimer, said it was too early to say what would happen to the New Zealand staff and their fate may depend on who buys the assets. AMP would seek a distribution agreement with the buyer to keep offering AMP-branded products, but once the assets were sold the bank would deregister with the Reserve Bank.

"If we are able to enter into a distribution agreement with a purchaser and that purchaser will provide us with mortgages and deposits, there won't need to be an entity as such."

AMP Banking used the internet and telephone banking as distribution channels and has no branches in New Zealand.

Guggenheimer said the return on invested capital in the New Zealand banking arm had been unacceptably low.

"The CEO has set acceptable levels of return on invested capital and while we were heading towards profit, we have got a significant amount of capital invested in the business and it's not meeting the required acceptable level of returns."

The news of the withdrawal and sale came only six weeks after Guggenheimer said the bank was heading for consistently profitable times in New Zealand.

The bank has operated in New Zealand since 1998 but has never made money. The New Zealand arm made a $1.54 million loss in the six months to the end of June, according to information it must file with the Reserve Bank.

For the 12 months to June the bank made a $16.51 million loss compared with a $19.92 million loss in the corresponding period in 2000-01.

Senior lecturer in banking studies at Massey University David Tripe said he thought the pullout was related to the troubles recently experienced by the AMP group, not losses in New Zealand.

"It's a bit sad. They tried," he said. "Over the past 12 months they have been trying to get things in order and it was starting to look like it was going to break even."

Guggenheimer said in October the bank was making a profit most months and asset growth had been around 4 per cent.

Restructuring in 2000 cost about $17 million as some operations were shifted back to Sydney and about 150 New Zealand-based jobs were lost.

Last month the AMP group signalled big changes to its operations, with only its name and Sydney headquarters building exempt from scrutiny.

The move followed problems in September with the capital position of its Pearl arm in Britain. The share price dived, and chief executive Paul Batchelor resigned to be replaced by Andrew Mohl.

AMP financial services New Zealand managing director Ross Kent said there was no effect on the rest of AMP's operation in New Zealand from Mohl's announcements yesterday.