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Moody’s downgrades AMP over wealth, governance struggles

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Moody’s Investors Service has downgraded its ratings for AMP Group and its banking arm, citing dampened operating results, reputational damage from the top ranks, and high net cash outflows from the wealth management business.

The agency changed its ratings for both AMP Group and AMP Bank from A3 to Baaa2 on Wednesday, pointing to the company’s recent governance weaknesses, which “resulted in sustained reputation damage which continues to affect the business and its operations”. 

Meanwhile Moody’s switched its entity-level outlook for AMP Group from ratings under review to stable.

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The governance issue was highlighted as a risk under Moody’s ESG framework, given the implications for the company’s compliance and reporting. 

Further, the volatile economic outlook and early super release scheme are expected to constrain AMP’s ability to attract new funds and grow its assets under management. 

However Moody’s stated AMP has seen “strong” fund inflows in its asset management operations and the mandatory superannuation system is a supportive factor for the group’s credit profile, partly offsetting the challenges in wealth management. 

“The negative pressure on superannuation fund inflows and margin compression will likely constrain the group’s revenue generation and profitability,” Moody’s said in its rationale. 

“While AMP’s transformation project should ultimately reduce costs and improve efficiency, the near-term investment needs will mean that improvements to net profits are likely to be limited in the next two years.”

The credit agency noted its ratings could be upgraded if fund retention improves, revenue and profitability become more sustainable and debt-to-EBITDA reduces substantially through a boost in earnings and a reduction in corporate debt. AMP Bank could be pulled up along with the group.

But AMP could face a further downgrade if it fails across those three measures.

AMP acknowledged the downgrade, commenting it has a strong balance sheet and capital position.

Standard & Poor’s rating for AMP Limited and AMP Group currently sits at BBB-, with a BBB rating for AMP Bank.

 

Moody’s downgrades AMP over wealth, governance struggles
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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