Moody’s Analytics, a subsidiary of Moody’s Corp. (MCO), unveiled a new risk management and capital allocation software called Mortgage Portfolio Analyzer (MPA).
Developed by Moody’s Research Labs Inc., MPA helps retail portfolio managers analyze and manage the credit risk of their mortgage portfolios. By using MPA, a manager can stress test a portfolio’s creditworthiness and can also take an informed decision regarding capital allocation.
MPA offers customized tools and forecasting models expected to provide valuable information to credit and fixed-income managers on whether to hedge or rebalance their portfolios using different corporate credit risk management techniques.
MPA is fully integrated into Moody’s Structured Finance Workstation (SFW) that allows institutions to analyze the whole loan and securitized portions of their portfolios using the same platform. In that capacity, MPA can be used to analyze both new and old loans, including delinquent loans, thereby keeping track of all mortgage assets.
MPA provides a number of simulation techniques, which can be used to measure loan-level and portfolio-level performances. The software can project defaults, prepayments and severity dynamics. In addition, MPA can explicitly model the effect of mortgage insurance at the loan level.
Moody’s remains focused on developing its footprint outside the core credit ratings service for public fixed-income securities. A Banking Financial Metrics product is expected to be launched in 2011, which will drive revenue growth going forward.
We believe the newly launched MPA will generate strong revenue growth, particularly from banking institutions, as they have the maximum exposure to the credit risk.
Moody’s analytics division develops and provides credit and risk management tools for more than 2,000 leading commercial and investment banks, insurance companies, money management firms and corporations all over the world.
Recommendation
We expect Moody’s to benefit from the gradual recovery of the US macro environment and to deliver strong top-line results, driven by Investor Service and Analytics business over the long term.
We also believe Moody’s, with its diversified credit research business model and international growth, remains a solid franchise in rating debt instruments.
We have an Outperform rating on a long-term basis (6-12 months). Currently, Moody’s has a Zacks #1 Rank, which implies a Strong Buy rating over the short term.
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