S&P downgrades AMP

AMP noted the credit agency had lowered its ratings from BBB+ to BBB on Monday, with all of the group’s entities remaining unchanged at BBB+.

But according to S&P, the overall creditworthiness of the remaining group is weaker following the divestment of AMP Life. 

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“We consider the group credit profile of the remaining AMP group to have weakened to ‘BBB+’ from ‘A-’, reflecting the credit quality of the remaining three primary operating businesses: domestic and international investment management, domestic wealth management and domestic banking activities,” the ratings agency stated. 

AMP defended its balance sheet in an ASX release, stating it continues to have a “strong” capital position with Level 3 eligible capital above minimum regulatory requirements of $2.5 billion. 

AMP Capital is tipped to become the top money maker in the group, with AMP projecting its operating earnings will comprise 45 per cent investment management, 25 per cent wealth management and 30 per cent domestic banking activities during the next three to five years.

S&P now considers the bank to be a core part of the group, expecting AMP will retain long-term ownership over it based on its public strategy and its likely stronger synergies between it and the rest of the group, in particular, wealth management. 

“The group plans to spend $1 billion over the next three years on enhancing IT, processing and digital capabilities, including the bank’s core system updates and process automation,” the agency stated. 

“We also note that the bank shares the group [brand name] and a range of corporate services with the group. In addition, we expect the bank to maintain a risk-adjusted capital ratio of more than 15 per cent over the next two years.”

But it warned there was a “degree of uncertainty on the financial profile of the wealth and investment management segments”, which could affect group creditworthiness. 

All other credit ratings assigned by other agencies remained unchanged. 

The group finalised the $3 billion sale of AMP Life to Resolution Life on 30 June.