Fri, Jan 30, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Invictus tells hedge funds it expects major decrease in Tier 1 capital for most banks

Tuesday, August 30, 2011
Opalesque Industry Update – US Financials have struggled throughout 2011 as the end of quantitative easing came into sight, and economic growth has stalled. For hedge funds this represents possible exposure problems not only through investments, but also through possible counterparty risk with partner banks. With the shadow still cast by the massive problems hedge funds had with UK-based Lehman prime brokerage accounts, bank stress testing has taken on a whole new level of importance.

On Tuesday, Invictus Group announced that it was making available to hedge fund clients a stress testing methodology that helps hedge funds access forward looking US bank stress test information to help managers determine the valuation of financial stocks.

"Hedge funds rely on complex algorithms that, in turn, depend on public data to value their bank stock holdings. The problem, we have found, is that the source data for these algorithms, particularly the key ones of capital and earnings, are incorrect as generally presented and must be adjusted on a correct and consistent basis across all the banks to make the data useful. Our proprietary methodology provides the means to do this accurately, efficiently and quickly," said Kamal Mustafa, Chairman and CEO of Invictus. Invictus says that backtesting of the firm’s offering shows it predicted every bank failure in the US since September 2008 in which the institution did not receive a capital injection.

The firm’s most recent stress testing of financials revealed that (as of March 31, 2011 data): 71% of banks will see a decline in Tier 1 capital, and 23% will find Tier 1 capital levels falling below 8%. 6% of banks will experience a significant (80%) decline in Tier 1 capital.

Of those banks listed on the NYSE/AMEX/NASDAQ:
-- 12% with price/tangible book value of less than the mean of 1.09 will see increases to Tier 1 capital

-- 19% with price/tangible book value in excess of 1.09 will experience decreases to Tier 1 capital

The analysis also shows a substantial difference between banks traded on NYSE/AMEX/NASDAQ and on the pink sheets:
-- 63% of the NYSE/AMEX/NASDAQ banks will have a decline in capital, versus 76% of the pink sheet banks

-- Of the 60 banks showing an 80% or more decline in capital, only 9 are on NYSE/AMEX/NASDAQ, but 51 are on pink sheets

Full press release: Source

kb

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: Ex-Citi trader launches 'sleep-at-night’ long/short equity fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: After working at Citi's proprietary trading desk, managing a large portfolio between 2008 and 2011, Joel S. Salomon founded SalaurMor Management in New Yor

  2. Investing - U.S. investors favor currency hedged Europe ETFs as euro tumbles, Quants win back investors as Swiss franc fuels volatility gains, David Einhorn's $7bn hedge fund is loading up on this stock, Hedge fund BlueMountain Capital unveils Ocwen Financial short, claims default on notes[more]

    U.S. investors favor currency hedged Europe ETFs as euro tumbles From Reuters.com: U.S. investors stung by the falling euro who want to stay invested in Europe are turning to exchange-traded funds designed to strip out the impact of the region's currency. The biggest among so-called "cur

  3. News Briefs - Millennials use tech tools to jump into investing, Winklevoss twins to launch bitcoin exchange with FDIC insured deposits, Robertson’s legacy from hedge funds to New Zealand, Real estate managers exploring smaller open-end funds[more]

    Millennials use tech tools to jump into investing It is the Facebookification of monetary investing. From social networking platforms that enable young investors to stick to every other's stock-picking mojo, to internet sites for initially-timers hungry for a piece of the Silicon Valley

  4. Update: Prosecutors seek 12 years for hedge fund manager Francisco Illarramendi[more]

    Komfie Manalo, Opalesque Asia: Federal prosecutors have asked the court to sentence convicted hedge fund manager Francisco Illarramendi to 12 years imprisonment for running an elaborate Ponzi scheme that bilked investors hundreds of millions in dollars, including a Venezuelan pension fund, report

  5. Institutions - Ontario pension fund leader calls all asset classes ‘expensive’, Taiwan's BLF plans $2bn in alternative mandates[more]

    Ontario pension fund leader calls all asset classes ‘expensive’ From WSJ.com: The head of one of the world’s largest pension funds said that across asset classes, “everything is expensive.” Ron Mock, who leads Canada’s $141 billion Ontario Teachers’ Pension Plan, said that the plan would