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Ratings agencies have had both their reputations and balance sheets battered by the financial crisis, but for the first time in two years there are signs things are looking up. And the big players are tentatively re-building their teams once again.
Standard & Poor's has just reported its first quarterly rise in revenues in two years, while Moody's has issued a bullish statement about 2009 earnings expectations (despite posting an 11% year-on-year decline in earnings for Q3).
A surge in both investment grade and speculative-grade corporate bond issues recently have helped bolster revenues. S&P's says in Q4 it expects: "double-digit increase from momentum in corporate issuance".
Russell Clarke, director of executive search firm Mantis Partners, says: "Ratings agencies cut aggressively, focused on operating efficiency and also suffered high levels of staff departures. Now that the market is stronger, it's natural they should be looking to hire again to meet client demands and realign themselves."
Ratings agencies were swift to announce redundancies, but both S&P's and Moody's (and to a lesser extent, Fitch) have a decent number of job opportunities at present. Moody's has also increased operating expenses, mainly due to "higher accruals for incentive compensation reflecting the stronger full-year outlook."
Nonetheless, a spokesperson for S&P's tells us: "Current hiring is in line with normal recruitment patterns, not the result of expansion."
Interestingly, though, S&P's has three new roles within its London-based structured finance division, which suffered particularly badly in the downturn.
But structured finance revenue at both S&P's and Moody's remains weak, with the majority of activity coming from TALF related securitizations in the US.
It may instead have something to do with the anticipated regulatory requirements coming from the European Commission, expected to come into force in the fourth quarter of 2009. Ratings assigned to structured instruments will need be differentiated from those given to other types of securities.
