Sun, Sep 25, 2016
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. Star names struggle as smaller hedge funds make hay[more]

    From eFinancialnews.com: Many big-name funds have been hit by sharp reversals in markets, including US government bonds and UK stocks, and have struggled to extricate themselves from positions that have gone bad. According to data group eVestment, hedge funds below $250 million in size are up 4.1% t

  2. North America - Acela fight splits hedge fund Connecticut and old money enclaves[more]

    From Bloomberg.com: Connecticut’s residential coastline is two worlds, the one of newcomer millionaires and one whose wealth and New England roots span generations. Now, their differences over a rail route threaten to gum up plans for the U.S. Northeast’s fastest-ever trains. About 30 miles from Man

  3. Activist News - Caesars offers creditors another $1.6bn, would spell end of hedge fund ownership, Activist investors double chance of CEO exits[more]

    Caesars offers creditors another $1.6bn, would spell end of hedge fund ownership From Calvinayre.com: Casino operator Caesars Entertainment has improved its offer to junior creditors to over $5b, but the offer is only good until Friday. On Wednesday, Caesars added an extra $1.6b to the $

  4. Comment - ‘Gut feeling’ measurable in hedge fund traders, How hedge fund managers can use blockchain to maximize benefits[more]

    ‘Gut feeling’ measurable in hedge fund traders From Laboratoryequipment.com: “Gut feeling” is an intangible – an automatic hunch – based on prior experience for some people. But the “gut feeling” is actually a measurable response developed in professionals doing some high-risk work, acco

  5. Opalesque Exclusive: Modern investor tools (2): A platform that does the job for you[more]

    Benedicte Gravrand, Opalesque Geneva: A new series on technology providers that assist asset allocators. There is disruption in the investor part of the world of hedge funds, coming from platforms that can replace traditionally-run search and analysis. Here is one of them. L