During a week when credit rating agencies faced increased scrutiny, Moody’s Corporation profits soared, beating market expectations.
Moody’s (MCO) revenue totaled $2.73 billion; increasing 20% from $2.28 billion in 2011, according to the earning’s report.
However, Moody’s stock has plummeted since news broke of a $5 billion civil suit against Standard & Poor’s and its parent company McGraw-Hill. The suit resulted from alleged losses stemming from collateralized debt obligations rated by S&P between March and October 2007.
Neither Moody’s nor Fitch were named in the DOJ suit, despite market observers and analysts suggesting the two firms could also face additional scrutiny for pre-crisis ratings on RMBS and CDOs.
Click on the chart to view Moody’s stock during the past week.
Additionally, several state attorney generals also filed lawsuits against S&P this week, for allegedly misleading investors who put money behind mortgage-backed securities and CDOs.
Recently added to the list is New York Attorney General Eric Schneiderman. Schneiderman subpoenaed S&P as well as requested information from Moody’s Investors Service and Fitch Ratings to examine ratings issued before the financial crisis, according to the Wall Street Journal. The AG’s office confirmed those details with HousingWire on Friday.
Nonetheless, Moody’s Investor Service’s U.S. structured finance revenue grew 50% in 2012 from 2011.
The primary reason was due to strength in ratings of commercial mortgage-backed securities and CDOs for the year.
“Moody’s delivered strong financial performance throughout 2012, with double-digit revenue growth in most lines of business,” said President and Chief Executive Officer Raymond McDaniel of Moody’s.
He added, “Despite ongoing economic uncertainty, we anticipate generally favorable market conditions to remain in place in 2013.”
Within Moody’s Investor Service, global corporate finance revenue increased 73% to $102.9 million for 2012 compared to a year earlier.
This was a result of strong issuance in both investment-grade and speculative-grade markets, the report noted.
In the U.S., Moody’s Analytics revenue increased 16% to $94.3 million from 2012 to 2011.
