Ratings Agencies Announce Higher Than Expected Profits

Credit rating agencies Standard & Poor’s and Moody’s are widely criticized for assigning high ratings to investments, particularly mortgage-backed securities, that later proved to be of poor quality. They are widely blamed for disserving investors.

Despite the damage done to their reputations, as the economy recovers, the credit rating agencies’ fortunes are reversing. Bond sales surged 41% to $1.2 trillion in 2009 as companies rushed to take advantage of loosening credit markets. As a result, the demand for ratings has also significantly increased so the ratings agencies have delivered solid operating results.

Moody’s fourth quarter income was reported at $101.9 million, 42 cents a share, which came in ahead of expectations. Similarly Standard & Poors’ owner, McGraw-Hill, reported earnings of 51 cents a share — far ahead of the 40 cents per share that was expected. Contributing to the profit surge was that revenue in their credit markets services group grew by 19%.