S&P Global Ratings lowered its ratings on AMP Ltd. to BBB+ from A-, and those on the group's operating subsidiaries by one notch each.
AMP's ratings were also removed from CreditWatch with negative implications and outlook.
The downgrade reflects the group's weakened group credit profile given the pending divestment of AMP Life Ltd., which will make the group less diversified while raising its reliance on lower-rated units, the rating agency said in an Aug. 27 report. AMP's primary operating activities after the divestment will include global and Australian investment management, wealth management and domestic banking activities.
Ratings also revised the ratings on AMP Life to A- from A.
The agency said AMP's ratings could be further downgraded over the next two years with the completion of AMP Life's divestment and a weakening of AMP's capital or competitive strength. AMP Life's ratings could be downgraded if its stand-alone credit profile declines, which could result from a slide in its capital position or operating performance relative to peers.
On the other hand, the agency could boost AMP's ratings if the divestment of AMP Life completes with evidence that the group can maintain steady earnings and a satisfactory competitive position.
AMP Bank
Ratings also lowered its long-term issuer credit rating on AMP Bank Ltd. to BBB+ from A- and affirmed its short-term issuer credit rating on the lender at A-2. The ratings were also removed from CreditWatch negative with a negative outlook.
However the lender benefits from an explicit arrangement of group support, noted the agency, and may form a more strategically important part of the group following the divestment of AMP Life. The bank's ratings may be equalized with group creditworthiness, and so reduce downward pressure on its ratings, if the agency deems that the bank has become a core group operating entity post divestment.
AMP Bank's ratings may also be lowered over the next year if the creditworthiness of AMP weakens following the divestment of AMP Life. Ratings may also raise the lender's outlook to stable if the group is able to maintain sound earnings post divestment.
Descriptions of credit ratings in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings document referred to in this news brief can be found here and here.
