Moody's Investors Service has upgraded Macquarie Group Limited's ratings.

It lifted the senior unsecured debt rating to A2 from A3.The short-term issuer rating has been raised to P-1 from P-2.

The ratings outlooks have been changed to stable.

Moody’s said “the upgrade reflects Macquarie's very strong profitability, supported by the evolution of its business mix reflected by the growth of its residential mortgage lending, and its conservative risk and balance sheet settings reflected by its high levels of liquidity, and strong capital adequacy. 

“Macquarie's profitability has been very strong and benefits from well-developed franchises in its chosen business segments, with net income to tangible assets of 1.47 per cent for the financial year ended March 2023.  

“In particular, the high revenue generation from the group's commodities business has led to a significant boost in profits over the last two years. While we view this earnings source to be more volatile through the cycle, we expect the well-developed commodities franchise to continue to be a significant contributor to the group's profitability.

“The group's earnings diversification is a credit strength, with the potential earnings volatility of the group's commodities and capital markets businesses balanced by the stability of the group's asset management business. 

“Additionally, the group's large and growing Australian retail and commercial banking business supplements the group's stable revenue sources. 

“In Australia, Macquarie is now the clear fifth largest residential mortgage lender, with a market share of 5 per cent as of March 2023.”