Ratings agency Moody’s has warned AMP’s cash flow could be hurt in the second quarter, following the fallout from the company’s testimony at the banking royal commission.
Moody’s said despite providing a reasonably stable first-quarter trading update, it expects AMP’s second quarter investment cash flow to be weaker than the first quarter results, and weaker than the prior corresponding period due to the damaging revelations of extensive misconduct heard at the royal commission.
‘The potential for reputational damage to impact net investment cash flow to the group will likely prove more prevalent during the second quarter, given the timing of the testimony and disclosures,’ Moody’s said on Monday.
Last week, AMP reported only a small two per cent fall in total assets under management in its Australian wealth management division in its first-quarter update, while assets under management in its funds arm, AMP Capital, remained relatively flat quarter-on- quarter.
But Moody’s vice president Frank Mirenzi said the embattled wealth management giant’s credit profile is ‘under pressure’, despite its strong capitalisation and market position, because of the reputational damage and the legal and compliance costs associated with the allegations of governance failures.
‘While it is still too early to predict the potential outcomes from the allegations against AMP raised by the commission, AMP’s governance failures are credit negative for the company and are appropriately reflected by our negative outlook on its rating,’ Mr Mirenzi said on Monday.
AMP admitted at the royal commission to charging clients for advice they never received and then lying to the corporate watchdog about it.
It has been in turmoil since its behaviour was exposed at the commission, with chairman Catherine Brenner following CEO Craig Meller out the door after mounting pressure.