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Why Macquarie shares could climb higher today

The Macquarie Group Ltd (ASX: MQG) share price is one to watch this morning after a credit rating upgrade for the group.

Why are Macquarie shares worth watching?

Macquarie Group shares could be on the move after the group and and Macquarie Bank Limited (MBL) received an upgrade from S&P Global Ratings.

In an after-market update, Macquarie revealed its long-term issuer credit ratings had been upgraded for both the group and the bank.

S&P said the rating upgrade reflected its view that “the group and bank’s risk management capabilities have strengthened over time”.

Macquarie Bank’s long-term rating is now ‘A+’, up from ‘A’, while Macquarie Group is now rated ‘BBB+’, up from ‘BBB’.

S&P also reaffirmed the two entities’ short-term ratings at ‘A-1’ for the bank and ‘A-2’ for the group.

The rating agency’s outlook on the long-term ratings is stable.

It’s good news for shareholders and could see the Macquarie share price climb higher in early trade.

Why were Macquarie’s ratings upgraded?

S&P cited the group and bank’s risk management outcomes pre and post the global financial crisis as a contributing factor. Compared to its peer group, Macquarie’s earnings volatility has been lower for a sustained period of time.

Macquarie’s internal reorganisation is “substantially complete” according to S&P, which will improve the transparency of its business activities.

An increase in “repeatable and sustainable income sources” and less capital market-related activities are also helping Macquarie.

We’ve seen this earnings stability for several years despite a soft half-year result reported by the Aussie bank in November.

Macquarie Group’s geographical and product diversity and resourcing of its risk management team also boosted its ratings higher.

How has Macquarie performed this year?

The Macquarie share price has performed strongly in 2019 and is up 26.81% to $135.50 per share. That performance makes it the only ASX 200 banking stock to be outperforming the S&P/ASX 200 Index (INDEXASX: XJO) this year.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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