eps:282 , six month profit 37%, income up 15%, page-32

May 2, 2011--Standard & Poor's Rating Services said today that its ratings on Macquarie Group Ltd. (Macquarie Group; A-/Stable/A-2), and its subsidiaries, including its key operating subsidiary Macquarie Bank Ltd. (MBL; A/Stable/A-1) are unchanged following the company's year to March 31, 2011 results, which were in line with Standard & Poor's expectations.
"While Macquarie Group's fiscal year 2011 profitability was below fiscal 2010, the result was within Standard & Poor's expectations and causes us no concerns at the current rating level," Standard & Poor's credit analyst Gavin Gunning said.
"Further, the quality of earnings was good, being materially less affected by asset impairments, equity-accounted gains and losses, and one-off profit or loss items that featured in fiscal 2009 and 2010 accounts," Mr. Gunning said.
Standard & Poor's ratings on the Macquarie Group continue to be supported by the group's strong market
positions--particularly those in its Australian home market--its diverse revenue streams relative to the size of its business, and its traditionally very good risk-management capabilities. These strengths are offset by Macquarie Group's continuing dependence on non-deposit sources of funding, despite materially improved deposit levels in fiscal 2011, its sensitivity to franchise and investor-confidence, and its exposure to a broad range and complexity of risks. "We consider that Macquarie Group
contends with a broad and complex range of reputational and
operational risks and risks associated with its entrepreneurial culture, in addition to typical credit and market risk," Mr. Gunning said.
For Standard & Poor's to maintain its view that the rating outlook is stable, we expect that Macquarie Group will maintain supportive liquidity, capital, and earnings. We expect capitalization to remain at or about current levels to counterbalance potential sensitivities concerning funding and investor sentiment. In its fiscal 2011 results, Macquarie Group indicated that four of its six key operating divisions could experience higher profitability in fiscal 2012, compared with fiscal 2011, with the other two operating divisions expected to be broadly in line with 2011. "Potentially higher profitability in fiscal 2012, compared with fiscal 2011, is expected to have a solidifying effect at the current rating, rather than contribute to upwards rating momentum," Mr. Gunning said. "Upward rating sentiment is not expected in the short- to medium-term," he said.
The stable outlook also reflects Standard & Poor's
expectation that the Macquarie Group will continue to evidence very good risk-management capabilities given the range and complexity of risks it manages, and that the group's risk appetite will not increase materially.