The Australian operation of global ratings agency, Moody’s Corporation, has emerged as one of the most lucrative profit spinners in the local financial services sector following spectacular bottom line growth in 2021.
According to financial accounts lodged with regulators last week, the bottom line profit of Moody’s Group Australia Pty Ltd almost doubled in the 12 months to the end of December 2021.
The Australian business, which includes the credit ratings division and the research and consulting division (that trades as Moody’s Analytics) reported an 89 per cent increase in full year net earnings to A$33.6 million.
While Moody’s grew revenue across most of its business lines during the year, the biggest growth contributor was the corporate finance business that oversees the issuing of credit ratings to subscribing entities.
Revenue derived from issuing “corporate finance” ratings increased by $12.5 million or 70 per cent to $30.3 million.
Moody’s profit growth was not attributable in any material way to cost reductions. The group’s operating costs held flat at around $44 million in the 12 month period.
The strength of Moody’s earnings performance in Australia might prompt financial institutions and other corporate clients to question the ratings agency’s fat margins.
Based on disclosures in the latest accounts, Moody’s Australian business is recording slightly more than half of every revenue dollar as operating profit.
After accounting for local taxes, the company’s net profit margin on revenue in Australia is about 37 per cent.
The 2021 profit surge brings the earnings margins of Moody’s Australian operations into line with those of its New York-listed parent.
Moody’s Corporation reported a record group net profit of $US 2.21 billion in 2021 – a 24.5 per cent increase on the 2020 performance.
According to a financial analysis of Moody’s 2021 global accounts by MacroTrends, the group pre-tax earnings margin was 44.3 per cent. The group net profit margin was 35.6 per cent.