Moody’s Staffing

In reviewing Moody’s 10-Q for 3rd Quarter 2010, you can draw some interesting conclusions about possible changes in direction at Moody’s.  In our case, we are most interested in what might be happening in structured finance.

On a year-over-year basis through the 3rd Quarter 2010, Moody’s has actually added slightly more than 300 staffers, a fairly healthy 7.6% increase.  However, while the company does not provide a breakout of staffing, by product line, the fact that Moody’s Rating Services for securitizations now represents only approximately 20% of its overall revenue attributable to rating activity is troubling.  As recently as 2008, securitization produced something closer to 34% of total ratings revenue and back in 2007, that figure was closer to 50% of total ratings revenue.

While overall revenues and income at Moody’s continue to rebound, that recovery does not seem to be fueled by structured finance ratings.  It would appear that much of the momentum is coming from it corporate ratings activity and, to some degree, from its Moody’s Analytics businesses.

If you believe in utilizing the rating agencies as a bellweather for relative market activity for new issuance, this information could be helpful.  On the other hand, even if just a small number of the 300 additions to staff this year have been made in structured finance, you might want to conclude that the worst is over and the recovery is on the way.

We also noted that the majority of the additions to Moody’s staff this year has been for non-U.S. positions.  While there could be several other reasons why, we believe that the continued uncertainty within the US regulatory markets for securitization is a factor; not just for Moody’s but for all service providers in this space.

About markferraris
Managing Principal Orchard Street Partners LLC

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