Moody’s has raised its outlook on Macquarie’s long-term credit rating to ‘positive’, largely due to the increasing importance and lower risks in the fast-growing retail banking division, especially mortgages.
The change in the outlook to positive “reflects the potential improvement in the bank's asset risk profile with the significant growth in Macquarie Bank’s retail banking franchise, which has seen its market share of residential mortgage lending in Australia rise to 4.2 per cent,” Moody’s said yesterday.
“We consider the rise in mortgage lending, which has historically been a low loss asset class, as providing an offset to the group's trading and investment banking activities.”
The outlook change also reflects the group's strong and improving profitability as its franchise matures across a number of business lines.
Macquarie's capital position remains very strong with a Common Equity Tier 1 ratio of 12.2 per cent for MBL as of 31 December 2021.
For its non-bank operations, Macquarie holds additional capital calculated on the basis of an economic capital adequacy model, reviewed by APRA.
On an overall group basis, Macquarie Group maintains surplus total capital above minimum requirements of A$8.4 billion, including $4.9 billion of hybrids.
Moody’s emphasised that “while the group maintains very strong capital and liquidity, the external funding needs of the group remains high leading to a market funds-to-tangible assets ratio of 40.8 per cent.
“This exposure to confidence sensitive funding remains a constraint to the rating.”
Moody's yesterday affirmed the A2 long-term senior unsecured debt rating of Macquarie Bank Limited. It has also affirmed the A3 long-term senior unsecured debt rating of Macquarie Group Limited.