* Annual underlying profit rises 6.5% in 2023

* Platforms segment profit jumps 38.5% from 2022

* AMP Bank pivots to lower loan book growth

Feb 14 (Reuters) - Shares of Australian wealth manager AMP staged their steepest gains in 21 months after it recorded a better-than-expected rise in underlying annual profit and announced a large return of capital, even though its banking unit continued to struggle.

As at 2306 GMT on Wednesday, the stock had jumped more than 10% to A$1.07 per share and was also among the biggest gainers on the Australian benchmark index, which was down about 1.3%.

Sydney-based AMP declared a final dividend of 2 Australian cents per share and said it planned to distribute another A$295 million ($190.28 million) to shareholders in the form of further dividends and on-market buybacks.

The company's underlying net profit after tax of A$196 million in the 12 months ended Dec. 31 beat a Visible Alpha consensus estimate of A$185 million and topped the A$184 million recorded a year earlier.

Its retirement planning division posted a 38.5% jump in underlying profit after tax of A$90 million for the fiscal year, as it benefited from favourable market conditions amid stabilising interest rates and improved equity markets.

However, AMP's banking unit continued to struggle with a competitive mortgage market crimping its margins, and posted a nearly 10% dip in underlying profit to A$93 million.

The 175-year-old wealth manager said it had pivoted to lower loan book growth at AMP Bank and would reduce costs further to support its earnings.

"AMP Bank is operating in a challenging and competitive market, and we are carefully managing volumes in this business given the impact on margins," AMP CEO Alexis George said.

AMP Bank's net interest margin was 1.27% in 2023, lower than the 1.38% in 2022. AMP expects a further fall in NIM to between 1.10% and 1.15% this year.

The company also said its chair, Debra Hazelton, would retire at the end of its annual general meeting on April 12 and would be replaced by Mike Hirst. ($1 = 1.5499 Australian dollars) (Reporting by Poonam Behura and Megha Rani in Bengaluru; Editing by Shinjini Ganguli, Lisa Shumaker and Jamie Freed)