UPDATE 1-Australia's AMP unveils capital return, first-half profit nearly halves

(Adds buy-back and special dividend, deal to repurchase 15% stake in AMP Capital and COVID-19 comments)

Aug 13 (Reuters) – Australia’s AMP Ltd said on Thursday it would return A$544 million ($389 million) to shareholders through a special dividend and buyback, and repurchase a 15% stake in its funds management arm.

The wealth manager, however, warned it would not a pay a final dividend after it reported a 41.8% plunge in first-half underlying profit from its retained businesses, as the coronavirus-induced market turmoil pummeled fee income and caused a higher loan-loss provision at its banking unit.

The 171-year-old company said it would buy back Mitsubishi UFJ Trust and Banking Corp’s 15% stake in AMP Capital for A$460 million.

The announcement comes as part of a major overhaul initiated by new Chief Executive Officer Francesco De Ferrari who took over last year to mend the battered reputation of the financial advisory firm that faces several class action suits.

Underlying profit from the company’s retained businesses was A$149 million, down from A$256 million a year earlier.

AMP’s domestic wealth-management unit reported net cash outflows of A$4.4 billion for the first half of the year, compared with A$3.1 billion a year earlier, as Australians withdrew larger sums from their pension funds to weather the pandemic.

“With the second wave of COVID-19 impacting the economy here and overseas, we expect conditions to remain challenging,” De Ferrari said in a statement.

The company said the sale of its life insurance business helped strengthen its capital position, enabling it to return A$200 million through a share repurchase and A$344 million through a special dividend.

Last week, the Sydney-based firm abruptly said the head of its domestic wealth arm stepped down.

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