Mon, Jun 27, 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. Opalesque Roundup: Hedge funds shrink as liquidations outpace new launches in Q1: hedge fund news, week 27[more]

    In the week ending 17 May, 2016, HFR said hedge fund liquidations declined narrowly to begin 2016 after rising sharply to conclude 2015, as investors positioned f

  2. Europe - Hedge funds keep powder dry over big Brexit bets, Hedge funds sense profit in Europe shock waves after Brexit vote, Soros warns Brexit may cause pound plunge worse than Black Wednesday, After Brexit: What will happen if Britain votes to leave the UK?[more]

    Hedge funds keep powder dry over big Brexit bets From FT.com: Hedge funds are shying away from big bets on Brexit, with many unwilling to risk further losses having already suffered a painful first half of the year. With the outcome of a UK vote on the country’s membership of the Europea

  3. News Briefs - ’Flash Boys’ get green light to launch stock exchange, Pimco says ‘storm is brewing’ in U.S. commercial real estate, Bankers get ready to rumble at Hedge Fund Fight Night, AIMA Australia celebrates 15th anniversary[more]

    ’Flash Boys’ get green light to launch stock exchange In an investing environment ruled by fast, the newest U.S. public stock exchange is banking on slow. Well, slower. IEX Group, which won Securities and Exchange Commission approval on Friday to go head-to-head with the New York Stock E

  4. Blackstone buys minority stake in New York-based credit hedge fund Marathon[more]

    Benedicte Gravrand, Opalesque Geneva: Blackstone Strategic Capital Holdings Fund, a vehicle managed by Blackstone Alternative Asset Management (BAAM), has acquired a passive, minority interest in Marathon Asset Management, for an undisclosed sum. Based in New York,

  5. Investing - Soros, Druckenmiller among hedgies profiting in market plunge, Hedge funds were most bullish on bonds since 2004 before Brexit, Surprise Brexit vote unleashes scramble for dollars, High-yield hit on Brexit but no panic selling, Scientist turned hedge fund founder lured to pound, euro, Hedge fund avoids commodities, posts big gains[more]

    Soros, Druckenmiller among hedgies profiting in market plunge From HITC.com: Bullish positions in gold and volatility and well-timed short bets on China and emerging markets, among other areas, were some of the trades that benefited hedge funds on Friday as markets digested Britons' s