Macquarie Group notes S&P has reaffirmed ratings and revised outlooks to negative due to financial market turmoil

Macquarie Group Limited today noted that Standard and Poor's (S&P) have reaffirmed its ratings for the Macquarie group of companies: 'A' long-term and 'A-1' short-term issuer credit ratings on Macquarie Bank Limited, 'A-' long-term and 'A-2' short-term issuer credit ratings on Macquarie Group Limited, Macquarie Financial Holdings Limited, and Macquarie International Finance Limited.

The Group's Chief Financial Officer, Mr Greg Ward, noted that S&P in reaffirming the ratings for the Macquarie group of companies observed:

• The group’s “limited direct exposure to the impact of the current global financial market turmoil, and very capable management of its liquidity, capital and counterparty exposures”.
  
• “Macquarie’s well-developed risk management systems are robust enough to deal with the market uncertainties under most stress situations commensurate with a ‘A’ rating category”
  
• “The financial and business fundamentals of the Macquarie group are unlikely to be materially affected by the current dislocation in financial markets”.

The group is “likely to maintain a strong earnings profile” and is “unlikely to have material credit or mark-to-market losses because it has very limited exposures to subprime mortgages, collateralized debt obligations (CDOs) and counterparties whose credit quality has materially worsened in recent days”.

The Group noted the outlook for the Macquarie group of companies had been revised to negative from stable due to financial market turmoil but that the most likely scenario is that the agency’s ratings on Macquarie group entities will remain at their current levels.

Macquarie also noted reported comments by Moody’s Investors Service Senior Vice President, Mr Patrick Winsbury, who said: “The fundamental story at Macquarie is very different from anything you’ve seen in the US. They have done an extremely good job avoiding all the pitfalls so far in the crisis.”

Mr Ward said that while current markets are challenging, the Group remains profitable, well capitalised and well funded with liquid assets of more than $A20 billion as at 30 June 2008. The Group’s existing long term funding sources exceed the Group’s long term assets; the Group has raised over $A6 billion of long term funding from various sources since 31 March 2008. As we have previously noted, we have been carefully managing exposures to professional counterparties for some time.

Macquarie Group is regulated by the Australian Prudential Regulation Authority (APRA) as a holding company of an Australian bank.

The Group also advised that it had an exposure to Lehman Brothers group of $A21 million and $A33 million to American International Group which separately and combined are not material.