Fri, Jul 21, 2017
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. Little-known cryptocurrency hedge fund seeks $200m in SEC filing[more]

    From Coindesk.com: A little-known, newly established hedge fund is seeking to raise $200m to invest in cryptocurrencies, according to regulatory filings. The bid by Cryptocurrency Fund LP to raise the money was revealed in a Form D submission to the US Securities and Exchange Commission (SEC), dated

  2. FinTech - Bitcoin hedge fund director: ICOs are having a 'eureka' moment, Big data and analytics: Not just for quants anymore, Data breach of a single firm impacts systematic risk (and cost of capital) for the firm's entire sector[more]

    Bitcoin hedge fund director: ICOs are having a 'eureka' moment From Coindesk.com: The director of one of the first bitcoin hedge funds offered praise for initial coin offerings (ICOs) today, arguing in an investor note that the novel fundraising method is already showing signs of

  3. Already above average, Singapore high-networth investors add hedge funds and alternative investments[more]

    Komfie Manalo, Opalesque Asia: An above-average proportion of Singaporean HNW wealth is allocated to alternative investments - the majority of which is held in hedge funds, according to the latest research by ReportLinker. In its report entitled, Wealth in Singapore: HNW Investors 2017

  4. Launches - Crypto boom: 15 new hedge funds want in on 84,000% returns, Crypto madness is striking VCs as Union Square analyst leaves to start new fund[more]

    Crypto boom: 15 new hedge funds want in on 84,000% returns From Forbes.com: With 43 projects raising $1.2 billion in initial coin offerings since May 1, according to Nick Tomaino's The Control, and with stratospheric returns for so many ICOs -- 82,000% for Ethereum, 56,000% for IOTA, 44,

  5. FinTech - The machines are coming... Elon Musk's grim warning, Tezos' $232 million ICO may just be the beginning, A gentle introduction to Initial Coin Offerings (ICOs), Billion dollar tokens, ICOS & crazy market swings WTF is going on!?, How AI is changing the way we invest, How the tech revolution is bringing flip-flops and beanbags to Wall Street, A 'machine-learning' approach to venture capital[more]

    The machines are coming... Elon Musk's grim warning From Tenplay.com.au: Tesla chief Elon Musk has called on US Governors to take 'decisive' action to curtail "the greatest risk we face as a civilization": Artificial Intelligence, or AI. Speaking at a meeting of the National Governor Ass