Sat, Feb 13, 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. Asia - Hedge fund manager Kyle Bass estimates China's foreign reserves below critical level[more]

    From Nasdaq.com: Investor Kyle Bass stepped up his attack on China's currency, arguing in an investor letter distributed Wednesday that the second-largest economy's foreign reserves are "already below a critical level." The comments mark the latest effort by hedge funds and other investors to raise

  2. Investing - Some hedge funds want to make subprime auto loans next big short, 11 hedge funds that are “all in” on the FANG stocks, Hedge funds short London luxury homes, Cynet raises $7 million from U.S. hedge fund[more]

    Some hedge funds want to make subprime auto loans next big short From Bloomberg.com: A group of hedge funds, convinced they have found the next Big Short, are looking to bet against bonds backed by subprime auto loans. Good luck finding a bank willing to do the trade. Money manage

  3. Investing - Hedge funds see selloff in European bank stocks as buying opportunity[more]

    From WSJ.com: The massive selloff in European bank stocks and bonds is overdone and presents a “phenomenal” buying opportunity, according to some of Europe’s top hedge-fund managers. Despite a 28% slump in European bank stocks this year, including a 38% fall in Deutsche Bank AG and a 34% drop in Soc

  4. Legal - Carlyle accused of fraud by ex-employee, Hedge funds win CDS breach of contract suit against Deutsche Bank, Hedge fund asks for OK on $27.5m Goldman CDO deal, SFO examines Barclays hedge fund profits[more]

    Carlyle accused of fraud by ex-employee From AI-CIO.com: A former portfolio manager claims he was fired for blowing the whistle on “crazy” and “irresponsible” investments. Carlyle Group has been sued by a former portfolio manager for one of its hedge funds, who accused the firm of “knowi

  5. Illiquid assets are all the rage for hedge funds[more]

    From Valuewalk.com: …Institutional investors are increasingly turning to illiquid assets and active management strategies to combat macroeconomic trends, anticipated market volatility and diverging monetary policy, according to a new survey by Blackrock. And this week, Bloomberg has reported that at