Invictus Consulting Group has launched a new platform where hedge funds can access hard-to-obtain and forward-looking bank stress test information to know if a bank stock is over, under or fairly valued in relation to its peers.
The firm developed methodology that stress tests banks' Tier 1 capital levels two years out for each of the over 7,500 U.S. publicly traded and private banks.
"Hedge funds rely on complex algorithms that, in turn, depend on public data to value their bank stock holdings," said Kamal Mustafa, chairman and CEO of Invictus. "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,"
This service provides hedge funds with individual reports on specific banks. It also offers screen reports to find banks that fit specific bank stress test parameters and customized reports based on a wide variety of investment parameters that are selected by the fund.
The latest bank stress data where Invictus reviewed 996 publicly traded single bank holding firms showed that 7708 (71%) will see a drop in Tier 1 capital, 228 (23%) will find Tier 1 capital levels falling to less than 8% and 60 (6%) will experience an 80% or more decline in Tier 1 capital.
Of those banks listed on the NYSE/AMEX/NASDAQ, the data said that 12% with a price/tangible book value of less than the mean of 1.09 will see increases to Tier 1 capital. Meanwhile, 19% with price/tangible book value in excess of 1.09 will experience dips in Tier 1 capital.