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Operator: Good day, and thank you for standing by. Welcome to AMP Full Year 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Alexis George, Chief Executive Officer of AMP. Please go ahead.
Alexis George: Yes. Thank you very much, and welcome to the full year results for AMP. Before we start proceedings today, I'd like to acknowledge the traditional custodians of the land which are holding this meeting which for us is the Gadigal People of the Eora Nation and pay my respects to Elders past and present. Of course, today, I am joined by our CFO, Blair Vernon. And before starting proceeding today, I would like to acknowledge the negative reaction to the results, but I believe these incredible results, we've delivered what we said we would, and we want to give you some color on that today. So if I look at the agenda, I firstly want to take you through an overview of the results, together with the achievements and deliverables of '25, then I'll allow Blair to walk through the individual business unit performances, what we've done around cost management, capital management and, of course, guidance and we'll then have ample time for Q&A. So if I look at where AMP is today, I think we're in a strong position to enter the next era of truly positioning us for growth and owning that space of retirement. We got to this point through sheer hard work over the last 5 years. We've simplified the portfolio, strengthened the balance sheet and returned $1.1 billion of capital to shareholders and recommenced dividends. We've reset the cost base and efficiency muscle is now well developed. We have a strong and talented team as demonstrated by the internal succession, and we resolved many of the legacy issues that we were dealt. And on top of that, we've restored reputation to the highest level since 2008. In my mind, this execution now allows us to focus on growth and to make AMP that place that can help all Australians to have a dignified retirement. We are unique in having all the building blocks for making this happen. If we look at those starting out, we have digital banking. We have simple super which has been added to by the release of Boost, which gives people the option for greater retirement incomes with no decisions. We have rewards to help people with everyday spending. And we're lucky enough to have a simple adviser menu grow on MyNorth. If we move to the building wealth base, we have all the investment options from managed accounts to managed funds. We support all forms of advice, digital, intrafund, and we are a vocal supporter of professional advice and the challenge it can have for individuals. We have lending both for individuals and many businesses. If we come to that preretirement phase, we have guarantees, which gives certainty but also exposure to the market, as we know, we're all living longer now. And we've just introduced SMSF loans in our bank, and we're working on many more solutions. And in retirement, I think it's fair to say we're the leader in terms of innovation here, where we have the full menu, account-based pensions, lifetime pensions and all forms of advice. And on top of that, we're dealing with the social aspects with our lifestyle at Citro. So when we come to the AMP strategy from my perspective, it's simple, growth, innovation and embracing change, whether it's new models, new tools or new partnerships. On growth, we want to continue to support those loyal advisers who stood buyers over many years, but on top of that, we now have the solution, the service, the price and the innovation to grow our new adviser base. We want to build that D2C capability utilizing our restored brand, and we want to grow AMP Bank GO deposits, which is part of the strategy to return -- to improve return on capital in our bank. On the innovation space, we want to build off lifetime solutions. We are unique in having that intersection of wealth and banking, and we want to use this to create new opportunities for our customers. And in change, we are embracing AI. 95% of people are now using it on a daily basis, and we have over 400 agents deployed across the organization. But on top of that, we acknowledge we're a small company, and we use the expertise of partners to help embellish this. So let's look at the highlights of '25. Our NPAT and NPS were both up greater than 20%, NPAT 21% and EPS 25%, and our cost base has been reset and the program complete, but it doesn't mean that we won't stop focusing on costs, and that's why we put CPI into our KPIs. The platform's cash flow was up 85% on last year at $5.1 billion, and the S&I flows are improving, too. We launched Bank GO in February of '25, and have $310 million in deposits and more customers and transaction accounts than we expected. And on top of this, we've resolved most of the legacy issues, including the last ones remaining from the Royal Commission. And of course, today, we again announced a $0.02 per share dividend at 20% franking. Diving a little deeper into each of the business units. In our platforms area, we've demonstrated strong momentum with growth in adviser numbers and licensees. Our innovation continues, not just in managed portfolios that are MyNorth, North interactive, which is a platform that helps advise the productivity, where we continue to pursue ideas to make advisers lives easier so they can focus on their customers. And the AI Filenote is a great example of this. And also, our lifetime solutions are now showing great momentum and we're the only one in the market who is yet to launch a decumulation product. And pleasingly, the Akumin or ex-AMP advisers despite now being completely separate from AMP continue to support us. I think [ MMG ] recently said that we're in the top 3 platforms for adviser satisfaction and where their lead users were in the top 2. If I move to our S&I business, cash flows are improving in Q2. We continue to have top quartile performance, good insurance, inter-fund advice and we're expanding our digital advice journeys constantly with over 30,000 users now going through those journeys, helping to improve education with our customer base. Also in '25, we launched Lifetime Boost, which is the equivalent of Lifetime Solutions, and we'll put the income stream portion of that in, in the first half of this year, and we put in an AMP rewards program for our customers. If we come to the bank, it was a year of execution, and our traditional bank would continue the mantra of margin over volume where we are focusing on higher-margin investor-only and the 10-year interest-only. We also recently launched the SMSF offering. We've had a renewed focus on balance sheet and particularly our risk-weight asset management with a view of removing or reducing capital usage as new opportunities now arise in the market to address this. And on the AMP Bank GO, as I said previously, we have $310 million in deposits with new offerings of overdraft, allowing us to focus on the mini business sector in the last half of '25. In New Zealand, the business just continues to deliver in reasonably difficult economic environment. We've had good performance there in KiwiSaver and the shift to supporting retirement through both advice and solutions is starting to demonstrate some benefits. And the revenue diversification there does offer some protection for our business. So on that note, let me ask you to go through the details, Blair.
Blair Vernon: Thanks, Lex, and good morning, everyone. As Lex mentioned in our opening comments, underlying NPAT is up almost 21% to $285 million for FY '25. Revenue increased 2.8%, while pleasingly, controllable costs fell almost 7% off the back of our business simplification program, which saw EBIT increase over 21% in the year. Earnings per share are up over 25%, and our cost to income fell more than 6% at the group level, noting our rebasing of this metric and recent disclosures. Return on equity at the group level continues to improve and is now reported at 8% for FY '25. Turning to the reconciliation of statutory NPAT, where 2 key drivers have influenced this outcome. Litigation and remediation-related costs of $95 million for FY '25 reflects the significant progress we made in resolving legacy class action matters during the year and recoveries against prior remediation programs. Business simplification expenses for the year totaled $50 million on a post-tax basis, in line with our previously announced business simplification program. This has resulted in statutory NPAT result for the year of $133 million. With now total AUM, which is up 9% to $161.7 billion, with increases posted across all 3 of our Wealth Management operating units. While market movements have contributed positively in FY '25, a significant increase on platform's net cash flows stands out compared to prior years. Across our Superannuation & Investments and New Zealand businesses, we also continue to see improvements in cash flow trajectory. Across our 5 reported business units in our group, we continue to see our strategy delivering results. These business unit results reflect the restatement of costs as advised to the market recently. Strong cash flows continue to drive momentum platforms, as Lex mentioned, while consistent performance improvements underpin our Superannuation & Investments result. At AMP Bank, our existing bank division showed underlying improvement on prior year while our AMP Bank GO division continues to scale. New Zealand Wealth Management continued to perform well, and the group's operating unit is significantly influenced by the strong performance of our China partnerships and those rebased group costs. Turning now to individual business units in a little more detail. Underlying NPAT for platforms is up over 9% in the year to $106 million. Average AUM is up almost 11% in the year, with the highlight being more than 85% improvement in net cash flows to over $5.1 billion for the year. Cost to income fell over 3%, reflecting continued disciplined cost control against a backdrop of sustained investment in our platform business. Margins contracted during the year by 2 basis points on a net AUM basis or 3 basis points at a gross level. This following slide breaks out the margin trend compared to prior periods. 58% of AUM, on North, generates investment-related fees on top of admin fees. Below the shifting mix from managed funds to managed portfolios has seen margin compression through the year, similar to the experience in previous periods. In addition to the mix stream, AUM growth at a client level continues to intersect with tiered fee structures and fee caps. Year-on-year improvement in net cash flows are reflective of our growth strategy and partnership with advisers across the industry. We continue to grow the number of advisers who have material volume on North, and extend new distribution agreements. Pleasingly, the cash flow dynamics for advisers with material volume on North also continued to improve, as highlighted at the bottom right of the slide. There remains a significant addressable market for North for new advisers, and that remains a particular focus for us in our growth plans for 2026. AUM mix is predominantly super and pension oriented, again, reflecting our clear focus on this segment of the market and in line with our strategy. In our Superannuation & Investments business, NPAT is up almost 15% and $62 million for FY '25, predominantly as a result of average AUM increasing 7.7% in the year. Net cash outflows almost halved in the year to $542 million, reflecting our continued progress in this business. Cost-to-income continues to improve, down almost 5%, noting that rebasing of cost allocations as previously disclosed. Margins on a net basis are steady at 48 basis points. Gross margins are down 1 basis point for the year, although this was matched by reduced IMEs, broadly delivering net-net margin stability as I mentioned. Admin margin compression is a function of continued AUM growth against fee structure and caps, analogous to our Platforms experience. Overall fund composition is largely unchanged year-on-year, although the underlying investment choices have delivered that IME compression. S&I cash outflow is $542 million compared favorably to prior years, and we maintain our ambition to reach positive net cash flows in FY '26. A number of initiatives targeting retention and new member acquisition were delivered throughout 2025 by the team and are anticipated to underpin the continuation of our results improvement across the S&I business unit this coming year. Turning now to bank. We're underlying NPAT for AMP Bank on a combined basis with $55 million for FY '25. NIM improved by 2 basis points year-on-year while our mortgage book growth was below system at 3.8%, consistent with our strategy. Return on capital for the combined bank was down 40 basis points, which reflects the impact of delivering and beginning to scale AMP Bank GO. AMP Bank ex of GO delivered improved NPAT, return on capital and cost to income metrics in FY '25, as highlighted in the middle panel of this slide. AMP Bank GO was successfully launched during 2025, and the launch and run costs began to emerge as reflected in the bottom panel of the slide, consistent with our strategy and previous guidance to market. The launch of AMP Bank GO is a key plank in our retail funding diversification strategy as we seek to improve NIM over time, specifically by growing transaction account balances. During FY '25, we continue to adjust the composition of funding overall for AMP Bank. This saw additional utilization of securitization off the back of favorable market conditions. Deposit funding mix were influenced by the planned runoff of rate-sensitive term deposits. And both our deposit and wholesale funding decisions added positively to NIM while the bias towards further wholesale funding to achieve capital relief had some downward impact on NIM, together with the redemption of our remaining H1 capital notes. Those funding mix decisions have been an important ingredient in our continued focus on capital consumption across our banking business in particular. We continue to see a reduction on risk-weighted assets relative to our mortgage book, allowing capital release back to the group. As noted earlier, the AT1 reported issuance of Tier 2 capital have impacted NIM during the year. However, this is a one-off change. Credit portfolio metrics and competition remained positive with our strategic focus on investors and interest-only options shown positive trends in the portfolio breakdown table on the slide. We continue to see improvements in arrears rates over prior year, while bad debts and LOEs remain nominal. 64% of borrowers are more than 1 month ahead in payments, up from 60% in FY '24. New Zealand Wealth Management reported an NPAT of $39 million, which is up over 5% year-on-year, against a backdrop of modest reduction in total revenue, which was partly impacted by New Zealand dollar weakness. Net cash flow has improved over prior year despite difficult economic conditions persisting in the New Zealand economy. Overall, cost performance continues to be a strength of New Zealand business with a broadly flat cost-to-income ratio. The group result of $23 million underlying NPAT is significantly influenced by the previously announced rebasing of costs across our business units. Controllable costs attributable to the group were $70 million for the FY '25 year. Equally significant is the continued improvement in our partnership performance, up over 15% for the year. Our China partnerships combined delivered more than 53% improvement to $72 million for the year, offsetting the improvement is a reduction in our other partnerships as a result of more normalized property valuations in our U.S. property fund when compared to the one-off benefit experienced in FY '24. Given the significance of our partnerships in China, we have summarized gain on this slide, some of the key drivers underpinning the performance of China Life Pension Company, or CLPC. CLPC is the preeminent pension company in China, managing over AUD 440 billion of assets in Australian dollar terms. CLPC has a commanding position in the Pillar 2 segment of the 3-pillar pension system operating in China. The Pillar 3 opportunity remains significant as the pilot phase across 4 provinces is expected to expand to all provinces during 2026, something CLPC has proactively positioned itself for. As noted at the half year, we saw an increased dividend payout ratio of 35% from CLPC and remain focused on ongoing dividend payouts. Across the balance of our partnership stakes, China Life AMP Asset Management or CLAAM, delivered its first dividend in July '25, which is a key milestone in this partnership performance. PCCP continues to deliver steady performance. However, as previously noted, we do not see exposure to a property investment business in the U.S. as core to our growth strategy for the group, and we will continue to explore divestment options at the appropriate time. We continue to pursue realization of [ Keary ] related to former AMP Capital business and a recent sale by DigitalBridge may create potential for Keary, however at this stage it remains subject to a range of conditions. Our business simplification program has continued to deliver against the commitments we made to address the cost base of AMP over the past 2 performance years. Controllable costs reduced almost 7% during FY '25 with reductions noted across all of the categories and work streams in this program. Our closing cost of $603 million reflect the absorption of $5 million of controllable costs associated with AMP Bank GO as we launched this business to market. Now turning to capital. Group CET1 capital has increased 4.5% during the year against a capital requirement falling by over 4%. This collectively sees our CET1 surplus capital position at year-end improved to $287 million. Allowing for the $0.02 per share dividend, which Lex has discussed earlier, this delivers FY '25 pro forma capital surplus of $236 million for the group. Deferred tax assets were consumed during the year, in line with our strategy and business performance, and we retired our group credit facilities given the positive cash and liquidity position now established across the business. FY '25 has seen capital generation as a result of our continued improvement in business performance, and we aim to continue to actively manage capital efficiency with a particular focus on improvements across AMP Bank in the coming year. We continue to assess the range of inorganic opportunities for scale or capability that are emerging across the wealth segment, which influences our immediate perspective on further capital management. Today's announcement of a $0.02 per share final dividend brings FY '25 dividends to $0.04 per share, and we anticipate consistency in this dividend approach through FY '26 and '27, noting our limited franking credit balances. And the absence of a compelling alternative use of capital, our preferred method of capital return to shareholders beyond our current dividend approach would be by on-market buyback. Now turning to guidance for the FY '26 year. Subject to market conditions, we expect margins in our platforms business to be 40 to 41 basis points and 60 to 61 basis points for our Superannuation & Investments business. At AMP Bank, we are targeting deposit balances of $1 billion in FY '26 for AMP Bank GO and expect NIM in the range of 125 to 130 basis points. Partnerships are anticipated to deliver 10% per annum return over the medium term. And controllable costs, as previously advised, are expected in the range of $630 million to $640 million for FY '26. Finally, our business simplification program remains on target to complete during FY '26 with a further $20 million of investment. I'll now hand back to Lex to summarize.
Alexis George: Thanks, Blair. So if we look to the year ahead, what do we see and what are our priorities? We still are an industry where they are a tailwinds. We have an aging population, we're living longer, and the certainty of income remains an issue. We know that wealth and the homes are the main 2 assets that Australians have, and we're lucky and uniquely placed in having exposure to both of these. We remain a player in a growing but changing market. And over the last 2 years, I believe we've shown that we're both agile and able to execute on our strategy. So in '26, what are our priorities? Growth. Organic first, but we have to have flows with a real focus on direct-to-consumer. We want to continue to grow that supportive adviser base, we want to focus on the deposits in AMP Bank GO. From an innovation perspective, we want to continue on the journey that we've demonstrated in retirement. We know that Australians need income solutions. We think we're best placed to deliver those. We want to focus on adviser efficiency as we've been doing, enabling NIM to focus and grow their customer base. And we know the next years will be changed. That's inevitable. We want to leverage what we've built with AI. As I said, 95% of staff are using it, and we're now starting to deploy agents across the organization. But we want to use our partners wisely because they have skills that we as a small company cannot hope to build. And on top of that, we want to continue to help the JV experience the growth they've done so today. So AMP is in the next chapter. We have repositioned the business and returned capital to shareholders. We have restored our reputation to the highest level since 2008. We've resolved most of the legacy matters, including those from the Royal Commission, and we're leading in retirement innovation. Our Platforms business is demonstrating strong growth and the S&I business is turning around, New Zealand continues to perform, and the bank is doing what we've asked of it, focusing on return on capital. So we are demonstrating strong growth. I believe we've got a great team in play and that we're ready to be able to deliver on the achievements of the last year. So on that note, I'll ask the operator for questions.
Operator: [Operator Instructions] We will now take our first question from the line of Julian Braganza from Goldman Sachs.
Julian Braganza: Just first question for me. Just on the China partnerships, obviously, it's very, very strong over the second half period about $45 million. Can you maybe just touch on if there were any one-off impacts in that number that led to the strong growth? And also alternatively, should we be expecting continued growth from these levels into 2026?
Alexis George: Yes. Thanks for that question, Julian, there were no particular one-offs in the year. We're just seeing strong growth in that Pillar 2 and also the emergence of the Pillar 3. I mean there is continued government support for personal savings in China so we are expecting the growth of 10% through the cycle to continue. And obviously, we remain pretty optimistic about that investment.
Julian Braganza: Okay. Got it. That's clear. And then maybe just in terms of the bank, if you could maybe just touch on the moving parts in the NIM from second half '25 going into FY '26, just how you're thinking about it? And also just the expected benefit from the additional deposits, the $1 billion deposits that you're expecting in GO. How does that benefit the NIM into FY '26?
Alexis George: Yes. Thank you. Maybe I'll let you, Blair, go through that.
Blair Vernon: Yes, absolutely. Obviously, you can see there was a little bit of softening in NIM in the second half relative to first half, but we did achieve a year-on-year improvement slightly in NIM, and I think it's broadly in line with our guidance. In terms of the mix issues, we obviously benefited from a shift towards more saver-style deposits and away from the very rate-sensitive term deposits that we saw, but there was also a broad mix change in the way we funded the bank. So we were using securitization more. There was obviously very positive conditions through the year. That allowed us to run off some of the very rate-sensitive turn deposits. You can see that some of the mix groups. So they were positive. I think what you see in the walk though is also some downward pressure. And there are a couple of key things going on, as I mentioned, was a one-off and rather unique scenario in terms of the replacement of the AT1 instrument. That had an impact of about 2 or 3 basis points downward in NIM, which is obviously a one-off impact as we replace that with a Tier 2 instrument. And also, we began to utilize again some wholesale funding to give us more capital relief on assets that have high risk weighting. So that is part of our strategy to drive capital release from the bank. And so when we think about margin as we go forward, that's important to us, and we've obviously guided to that range. But critically, it's about capital release from the bank. And so we will continue to explore different balance sheet strategies to allow us to liberate more capital out of the bank back to the group.
Alexis George: Yes. I think it's important to highlight that for the bank return on capital whilst we have to guide towards NIM, return on capital will be the measure we'll be measuring success against.
Blair Vernon: And Julian, just the final point of your question, which was on the GO deposits. I mean the goal we've got of $1 billion of GO deposits in FY '26 is an important scaling -- I would call it, a scaling proof point that the math, I think, quite obviously, would suggest that, that's not going to have a hugely impactful -- impact on the total NIM position. We've always indicated that we expect that to be more meaningful in FY '27. But undoubtedly, every dollar that we can add in to GO and transaction accounts is going to be positive. And so that's why that growth number is really critical to us. As I said before, the focus on balance sheet management to release capital is the most potent component in terms of levers we've got right now as we look at FY '26 for the bank with GO, continue to scale over the top of that.
Julian Braganza: Okay. No, that's clear. Then maybe shifting to the platform business. I know in the past you've talked about opportunities to help stabilize the margin and offset some of the mix impacts. Can you maybe talk to those options? Because at the moment, the margin has been diluted. But I just want to understand if there's any initiatives being put in place to support that margin? Or have they already been done and that the underlying margin is actually weaker ex those initiatives?
Alexis George: Yes, thanks. I mean, I think it's clearly a very competitive space in the platform space. There's many things that we're looking at. And I think we do have the advantage of having an investment management capability internally as well as the administration. So that does give us some options. I mean this things we're looking at with the trustee right now, we've got to have that best interest duty always in mind when it comes to customers. But I think if you look at our cash rate, we're clearly the most competitive in the space both from the fees and return. And so we're continuing to see new developments we can put in place there. And just looking at the investment management capability as we've improved performance, how can we make sure that we're more part of those managed portfolios and all those things are happening as we speak.
Julian Braganza: Okay. And that's not factored -- is that factored in your guidance for next year?
Alexis George: Look, when we're thinking about guidance, we're thinking about all of those things. But clearly, we want to make sure we can deliver the guidance, hope we will constantly be looking for upside, but we absolutely want to make sure we can deliver within that guidance.
Operator: We will now take our next question from Andrei Stadnik from Morgan Stanley.
Andrei Stadnik: Can I ask my first question just around Slide 20, talking about, I think, almost 100 new advisers added in the second half that are using -- starting to use North maybe over 100 for the year. That $50 million per adviser, does this imply this $5 billion to $6 billion additional flows that could be coming through? And how are you thinking about some of your adviser relationships and penetration?
Alexis George: Yes. Thanks for that question. I mean, clearly, we want to continue to grow advisers. And as you said, we want to continue to grow advisers that support us. For us, we've designated that an active adviser has got greater than $1 million in assets under advice. Many others use different metrics. The important thing for me is that we continue to grow that number because we know we don't see flows from new advisers probably to about 12 months after we started to interact with them or flows of any significant. And I think the benefits you're seeing in our Platforms business today being that $5.1 billion is really the hard work, signing up advisers and showing them our solution over the last couple of years. So that is a really important number for us. Guessing whether that's $5 billion, $10 billion, $2 billion is a little hard, but I certainly want to see the flows grow, the net flows grow from the $5.1 billion today. I would say that it's also important, though, that we keep support from those existing advisers, particularly Akumin or the ex AMP, and we're seeing that support continue right now. And even in the recent surveys, we were top 2 in terms of those advisers that do -- that use us as a lead platform. So we've just got to keep on delivering on this solution. And I think with the recent change in our sales team, we can be a bit more aggressive yet again on the sales front because we know that we'll see benefits come through in the following 12 months.
Andrei Stadnik: If I can ask kind of a follow-up question around the flow thematic. So I know that Netwealth and HUB give guidance and flows more revenue margins, whereas you continue to stick with this view of giving guidance revenue margins, but not on flows despite showing very clear pipeline and improvement in structural and flows. So why wouldn't you consider given guidance and flows?
Alexis George: Yes. Look, we can consider that. But I think for the size of our book, which is large relevant to the flows, it's still the size of the book and the margin that make more difference for the future. I mean as we continue to build on that flow and if we got $10 million -- $10 billion next year, we can have another look at it. But I mean we believe right now, the margin and the total AUM are better things for shareholders to be able to predict the future.
Andrei Stadnik: And maybe one final question. Just around managed portfolios. So managed portfolios, I think you mentioned is one of the reasons why the platform revenue margin is heading lower. But that's just the revenue margin. Can you talk about the profitability of managed portfolios and also some of the other benefits of driving growth there?
Blair Vernon: Yes. I'll maybe pick that one up, Andrei. You're absolutely right. I think I mean, the profitability signature of managed portfolios is still really positive. It just is, for us, there is a mix issue as we come out of the traditional managed funds, but we see the growth being a managed portfolio. I think the thing that we see that as the value-add combined financial portfolios is the same as advisers see. The simplicity of managing clients and the managed portfolio construct has the potential for them to, therefore, manage more clients and more volume per adviser and that's a key metric for us because we know advisers are in short supply across the market. So to the extent to which we can deliver efficiency benefits to advisers allows them and their practice to manage more clients and, therefore, drive more revenue. And there's kind of 2 key levers of that. One being the managed portfolio construct, and we've got a really diverse range of those managed portfolios. And as Lex mentioned earlier, there is clearly an in-house investment capital that gives us opportunity to participate in the financial flows. And then the work that we and the team are doing around digital tools, AI and so forth, we're running companion with that to drive that efficiency back down.
Operator: We will now take our next question from Lafitani Sotiriou from MST Financial.
Lafitani Sotiriou: Can I start with a follow-up on Andrei's profitability question on investment platform? Just so we're clear. So yes, there is lower revenue margin coming through from the managed account side, but is the EBITDA margin the same for the revenue being generated? Or is there an offsetting because of the scale benefits and it's again the automation benefits, have you got less cost that you're needing to invest in the process?
Blair Vernon: Maybe I'll answer that, Laf, thanks for the question. We've absolutely got the capacity to continue to invest in the North platform. So that's effect into our plans. And from my point of view, the growth and the way that's growing through those different product components doesn't give us any concerns in terms of the cost signature in the business.
Lafitani Sotiriou: But the profitability from, say, as it shifts across and what your sort of if the mix shift continues as it is into the next couple of years, do you -- can you -- do you anticipate continuing to be able to grow the earnings?
Alexis George: Yes, we do, Laf. Categorically, yes. I mean, I think we've demonstrated that we can deliver growth. Yes, there has been margin reduction over the last few years, but I think that's been tempered by the growth in the volume, which has helped us contain the variable cost, and we want to continue to make sure we can grow there. I would say, again, we've got investment management capability as the returns improve. We've got greater opportunities to make that part of the managed portfolio. And there's some other ideas we're working on at the moment to improve margin. So I'm not saying it's not a competitive environment. But I've got -- I think we've got the foundations in place to make sure that we can build profitability and clearly, growth is an important component of that.
Lafitani Sotiriou: Got it. Can I move on to the bank now. And so it was about nearly 3 years ago, 2.5 years ago, you mentioned the initial change in bank strategy and investing. The guideline, the time line given to us at the time was around 3 years before you started seeing some returns. And you're saying that the focus is on return on capital and the return on capital was probably 6% to 7%. Now it's down to 4% handle. So what is the key focus? Now look, what are we looking for? What are the hurdles that we need to see that materially improve?
Alexis George: Yes. Let me point out a few things. Firstly, you're right. We announced about 18 months ago that we were going to launch AMP Bank GO. We in fact, launched that in '25 for all the reasons you said. We needed to have a diversification in funding and a cheaper base of funding, and that's the whole purpose of AMP Bank GO. Our criteria for the bank very clearly state is return on capital. If you look at the bank, that's why we're not growing the volume of lending. And in fact, the return on capital from last year in the bank traditional has grown from 5.2% to 5.7% for that reason. I think the other thing I would point out is there is quite a bit of innovation happening in the balance sheet phase in the market at the moment. You can see what we've pulled down our risk-weighted assets, which gives capital relief in the bank, and we'll continue to look at new opportunities for that but nothing has changed from what we announced. We expect '25 to be the execution and '26 and '27 for AMP Bank GO to be about build when you'll start to see the benefits.
Lafitani Sotiriou: And so what's the target ROE? Where do you -- return on capital that you think you can get to in the next 2 years, right? So you're sitting at 4.4% in the second half.
Alexis George: Well, as I've said, the benefits would start to flow through the end of '27. I mean we're in a fairly dynamic market now when it comes to capital, when it's got to be in relative to the cost of capital, which is why return over cost of capital becomes the most important measure. I would see accretion in that '27 year.
Lafitani Sotiriou: 50% accretion -- but even 50% increase from here is still well below your cost of capital, right? So what kind of accretion are you expecting in the next year -- like what -- this is a long time for the market to wait for you to get a turnaround on the bank. Like are you a natural owner in having a bank? So historically, we asked you 2, 3 years ago, why do you own the bank, what's your competitive advantage, and you couldn't articulate one, right? And you still haven't shown it yet. So why should the investor community or shareholders continue to sit back and watch money being torched going into the bank?
Alexis George: Yes. Laf, I think that's a fair question given the current environment, but I would say a couple of things before I'll ask Blair to comment on the ROC that you questioned. Firstly, I think we're always looking at opportunities. That's the role of us as the management team. That's the role of our Board to continue to look at the best mix of portfolio. And AMP Bank GO firstly gave us options in terms of cost of funding, and it gave us options in terms of something else in the toolkit that we didn't have because I remind you before we just lend and we took deposits at a higher margin. And I think we're just continuing to execute on that. But we're very well aware of the returns versus the cost of capital, and it's something that is discussed frequently. I think the other thing I would point out, as you can see in the results, we are starting to release capital from the bank by utilizing better balance sheet management, and we'll continue to do that. I'll let you comment on the returns, Blair.
Blair Vernon: Yes, I absolutely take your feedback, Laf, and the valid points. I think clearly, our focus on improvement is return on capital in the foreseeable future because as you point out, frankly, it's not an acceptable level for us. And we don't want to be in a situation we will deploy capital on that return. So improving return is critical. I think the more -- the other immediate lever right now, though, is also, frankly, reducing the amount of capital that is deployed against the bank and as Lex was mentioning, we're exploring aggressively a range of options around balance sheet management because if you look at the capital deployed in the bank, I think there are clearly opportunities to release that back to the group. And that will drive improvement at a group level while we continue to address the underlying metrics in the bank itself.
Lafitani Sotiriou: What -- can I move on to the inorganic opportunities you flagged potentially in scaling up in wealth. Can you give us some kind of framework as to what you're looking at? So in particular, either capability gaps? Or are you -- can you rule out whether you're looking at stuff like Panorama or CFS at the moment?
Alexis George: Yes. I mean, as you know, it's not about capability gaps that we might have today. I don't believe there's any glaring gaps in our portfolio, especially on the wealth side. But we're in a dynamic environment. And particularly in our platforms business, our primary objective is trying to make advisers lives easier, so they can focus on working with our customers. So if there's capability there that we can bring in that would accelerate what we can deliver to advisers, we will. And there's many opportunities we look at constantly in that space to bring in capability that it would be about augmented. I mean we -- yes, there is scuttle back in the market and there's change happening in the market, and we have to be completely open about that. We are all aware of that's happening. We're all aware that scale is important. I mean are we specifically looking at some of those at the moment? We're always looking in the market, but there's not anything active happening, and we have to listen to our shareholders when we consider any options like that. But we absolutely will look at capability.
Lafitani Sotiriou: And just finally, with the buyback given where the share price is now, could we expect the relative investment now makes more sense, you're at a discount to NAV to step in? Or how should we think about what will actually trigger a buyback coming through because you've now put it on the table as a priority. And are there any asset sales that are being considered? So I remember in the past you talked about possibly selling PCCP. You've also tied with the bank core or noncore. Is there anything that you can talk to.
Alexis George: Yes. Firstly, let me talk about the buyback. I mean we wanted to be explicit about the fact that if there was further capital returns above the announced dividends and the announced dividends both now and through 2026 and '27, that it would need to be in buyback for all the reasons we've discussed in relation to franking credits. So we wanted to be explicit about that. I mean, I think we've demonstrated that we've been pretty regimental about managing our capital over the last few years and giving back to shareholders where it made sense. And clearly, share price is a very important component in thinking about capital management, and I know the Board will be very focused on that. I'm not going to sit here and make any particular promises about that today, but clearly, share price is an important component. When it comes to asset sales, I mean, we've been explicit in the past. And I think in his statements today, Blair was pretty explicit about the fact that PCCP or the U.S. real estate business is not strategic to us. It's certainly not a component that we want in the portfolio long term. But it's a good business, and we want to make sure we get value out of that business. So at the right time, we will look to do something in that space.
Lafitani Sotiriou: And the bank?
Alexis George: I mean it's not on the table at the moment for all the reasons I've talked about. I'm not saying it will never be on the table. I think the Board and I are very responsible about the fact that entertaining all ideas that come through the door. And if they make sense, we would consider them.
Operator: We will now take our next question from Nigel Pittaway from Citi.
Nigel Pittaway: Just a couple of questions, if I could, on the S&I business. I mean in the first half, you did talk about seasonal impacts and the likelihood of the margin expanding second half that obviously didn't occur. So can you explain why those seasonal impacts didn't come through as you expected?
Alexis George: Not sure we talked about the margin expanding, but...
Nigel Pittaway: Well, assuming flat guidance, you effectively implied it.
Blair Vernon: Nigel, I think let's drive in. We didn't talk about margin expansion, but we certainly were cautious about optimism in the second half. I think the key thing that has driven that margin position is obviously the AUM growth. As I highlighted, as you get individual balances per client growing, that intersects with the fee caps and mix. And so that continues. While it's great that we get AUM up, and you can see the total profit number, which is great for S&I that does have some impact on margin. I think that -- the reason I called out in S&I, the gross first net is that you could see equally the IMEs came down. So on a net basis, it's actually flat year-on-year. So that's encouraging. I think that for me, holding that margin steady is a really important activity for the whole team, and particularly the management team with S&I. The critical factor beyond that, obviously, for us has continued to drive that improvement volume. As you talked to, we saw some seasonal factors in the first half. We want to continue the broader trajectory year-on-year and track towards that positive cash flow growth.
Nigel Pittaway: Okay. I got the impression there were seasonal factors due in the second half because, I mean, although, yes, okay, you didn't say expanding, it was implied because you said flat for the full year, which meant it had to expand in the second half. Yes. So the seasonal factors just seem to have -- they were on the slides in first half, they seem to have dissipated.
Alexis George: Yes, Nigel. I think we've learned from using approximate because the top number tends to be taken. So we try to be a bit more specific with our guidance this year.
Nigel Pittaway: Okay. Then maybe on flows in S&I. And previously, you've expressed a decent amount of confidence that you can get this business into positive flows. You were hopeful that sort of, in particular, the retention initiatives that you were deploying would facilitate that. I don't seem to see much confidence of that in the presentation today. So just are you still confident of moving that relatively soon into a positive flow position?
Alexis George: I don't think we've changed from our ambition. That '26 is a year that we'd like to turn to neutral flow. So it certainly have not walked away through from that ambition. I'm not saying it's easy, but the ambition is still firmly on the table and we're all running towards it. I mean we all know that the June month is a bit of an anomaly. But I think we've got all the elements in place to drive towards that.
Nigel Pittaway: Okay. And then can you also maybe just give us a sort of a bit of an update on how MyNorth Lifetime is going and whether you've had any success in sort of being able to streamline the sales process to make that more readily attractive to advisers?
Alexis George: Yes, you're right. We have because I think when we launched that product, we launched a product and we needed to spend a bit more time building the interaction and the education of advisers around that. We are starting to see growth in that now. And maybe Blair has the actual numbers. I can't remember them off the top of the head. But I think the fact that many of our competitors are copying whether they're executed on it or planning to deliver on it is an indication that we are starting to see flows in that space. It's not just the flows I'd remind you that we get from retirement. It's also the rest of the flows that come with the adviser community when they bring those products across but just try and get you the exact numbers that we've seen in that space. Blair?
Blair Vernon: Yes. The year-end position for Lifetime AUM, I think from memory, $764 million. So that's substantially up on where we ended '24, which I think was roughly $340 million. So we continue to see that scale. We made some changes in just suddenly to the configuration of the product offer, which definitely improved flows in this year. And yes, our expectation is that growth will continue as we go forward. But certainly, a good growth rate on '25 numbers over '24.
Operator: We will now take our next question from Andrew Buncombe from Macquarie.
Andrew Buncombe: Just two from me. The first one, apologies if I missed it, but have you provided expectations for your loan growth in the bank in FY '26? And if not, how are you thinking about it?
Alexis George: Yes. No change in our strategy there. It's margin over volume. So you could expect quite flat in terms of total loans.
Andrew Buncombe: Excellent. And then the other one from me was in relation to the outstanding class actions. There are 1 or 2 comments to them in the slide back again today. Maybe if you can just give us a bit of an update how many are outstanding and the updated expected time lines on those, please?
Alexis George: Yes. So just to remind you, there are 4 class actions we had as a result of the Royal Commission. We've come to a settlement arrangement on all 4 of those now. They all haven't actually gone through the core process here yet, and we haven't paid all the proceedings, but we've agreed settlement. So I would expect that they would be complete during the '26 year. There was 1 new class action that came to the party in '25. I don't expect any real details or progress on that for some time, and I'm talking years, Andrew.
Andrew Buncombe: Yes. So other than that new one, have provisions been made for all of those other ones before the balance date of 31st December '25? Or is that still to come?
Alexis George: No. We provided for all of those in the '25 accounts because we actually got to an agreement in relation to settlement. And in fact, we put out ASX releases when we actually did those. As I said, the only thing that's to complete is payment, but we've also allowed for that in our cash balances.
Blair Vernon: Yes, if I could just clarify that, Andrew, in the capital position on Slide 35, when you look at the group cash pro forma, we've adjusted that, so that it accounts for the sort of cash we're holding for the pay away once it goes through the core process this year.
Operator: Our next question comes from Siddharth Parameswaran from JPMorgan.
Siddharth Parameswaran: Just a question just on competition in platforms on pricing and incentivization of advisers or just preferential pricing. Just want to get your perspective of whether competition is increasing on the -- in the platform space. I think we've seen a little bit of revenue margin compression across the board. I take your point that there could be some investment mix shifts and maybe just the growth of the managed account section is having a -- is having an impact. But maybe if you could just provide some color around pricing, in particular, in the market and what you've done. And what's in your guidance for next year?
Alexis George: Yes. I don't think the pricing has got any more or less over the last few years than it is today. So I'm not sure it's price that we're actually competing on at the moment. As you said, it's more a mixture issue, but certainly remains a very competitive space, but I'm not seeing too much pressure from a headline price perspective.
Siddharth Parameswaran: And in your -- okay, so that's the same in your guidance for revenue margins into '26?
Alexis George: That's correct.
Siddharth Parameswaran: Yes. Okay. And just a question on variable costs as a percentage of AUM. They seem to be coming down again. Just wanted to get a bit of perspective on what's happening there and what the outlook is?
Alexis George: Yes. Blair, do you want to take that one?
Blair Vernon: Yes. I mean there's obviously a mix issues in there in terms of IMEs as well as some other components like brokerage expenses and the like. So they largely are a function of actions by clients in terms of mixed choices, which flows through IMEs and the related variable costs associated with that, particularly things like brokerage.
Operator: Next is a follow-up question from the line of Andrei Stadnik from Morgan Stanley.
Andrei Stadnik: Can I ask just around the NIM guide for the bank. Have you considered the current -- so just the recent interest rate increase in that? And have you allowed any further cash rate increases?
Alexis George: I mean no, we probably didn't allow for that, but let me make a comment about our bank. Because to date, we're largely -- we get funding through deposits, and we lend, we kind of sway on both sides, which is the whole reason for creating AMP Bank GO because to date, we don't have a large amount of transaction accounts that have little interest rate on them. So a rate change for us is probably not as important as it might be to some other players.
Andrei Stadnik: And look, for my second question...
Alexis George: Both sides of the balance sheet.
Andrei Stadnik: Right to that, yes. And look, another question, if I can, just in terms of capital management, can I ask like how quickly could you move on buybacks? And also, why would you give guidance for flat dividend for 2 years? I mean does that not imply, likely you're not even expecting to grow earnings? Like why would you give flat guidance all the way to years out, which is incredibly unusual, I think?
Alexis George: Yes. Let me just make a comment on that, and then I'll ask Blair to comment on the capital. Why have we given that guidance on dividends? And why we've been so explicit about buyback? It's because we wanted to give consistency around the franking credits. And we don't, at this point, have a large pool of franking credit. So that's why we've given a consistent dividend. That does not mean that we would not give capital back to our shareholders, but the preferred method above that $0.02 would be through a buyback for those reasons, the franking credit. Blair, is there anything else?
Blair Vernon: Absolutely, Lex. I think take the point, Andrei, it's a little unusual, but I think the very small franking credit balance we have definitely influences that view. And obviously, I think we've had pretty clear feedback that buyback would be preferred beyond that. If we have surplus capital and there's not a compelling, I would stress compelling, alternative use of that, then absolutely, you want to return that to shareholders. In terms of timing, well, there's just procedural things to go through, but that's all manageable in terms of once -- if the Board concludes that view, then we just set about that process.
Operator: I'm showing no further questions. Thank you all very much for your questions. I'll now turn the conference back to Alexis for closing comments.
Alexis George: Yes. Thank you very much, and thank you for everybody for listening in today. I don't think any of us are immune to the shareholder reaction today, and we certainly take that into consideration. But I want to reiterate that I think these are a credible set of results, and we've delivered on our promises, and I feel proud of what sits in front of us today. So thank you, everybody.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.