AMP (ASX:AMP) share price climbs despite ratings downgrade

a man in a business suit hangs on with his bare hands as he nears the top of a rocky mountain with little footholds and mist swirling around the mountain top.

The AMP Ltd (ASX: AMP) share price is on the rise during Monday afternoon. This comes despite the financial services company receiving a ratings downgrade from a bond credit rating agency.

At the time of writing, AMP shares are fetching for $1.195 apiece, up 1.27%. That’s a sharp contrast from when they were trading for as little as 88 cents in late September.

Moody’s lowers AMP rating

The AMP share price is showing little despair on the negative update that came in late Friday night.

In a statement to the ASX, AMP advised it received notice that Moody’s lowered its ratings on its group entities.

As such, AMP Group Holdings and AMP Group Finance Services were graded from Baa2 to Baa3. The rating assigned to AMP Bank by Moody’s remained unchanged at Baa2.

Bond rating agencies are firms that evaluate the creditworthiness of both the debt securities and the issuing company. These agencies provide ratings, commentary, and research on businesses. The ratings are then used by investment professionals to determine the likelihood of the debt being repaid.

Bond ratings range from an investment grade of ‘AAA’ meaning a very strong capacity to meet financial commitments and minimal credit risk. The speculative grade of ‘C’ or ‘D’ indicates likely payment default on financial commitments and bankruptcy.

It’s worth noting that this is in the mid-range of the bond credit ratings, representing “adequate capacity to meet financial commitments, moderate credit risk”.

The outlook was changed based on AMP having a smaller capital and earnings base after the private capital markets demerger. This is expected to follow through sometime in the first half of FY22.

All credit ratings assigned to AMP by other ratings agencies such as Standard & Poor’s were not altered.

About the AMP share price

Founded in 1849, AMP provides superannuation and investment products, financial advice, and banking products including home loans and savings accounts.

Headquartered in Sydney, the company operates in both Australia and New Zealand.

Over the last 12 months, AMP shares have fallen almost 30% and are down 23.5% year-to-date. The company’s share price has lost about 80% of its wealth from early 2018, reflecting negative investor sentiment.

Based on today’s price, AMP presides a market capitalisation of roughly $3.9 billion, with approximately 3.27 billion shares on issue.

The post AMP (ASX:AMP) share price climbs despite ratings downgrade appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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