NEW YORK & LONDON, June 8, 2011 -- Stress testing for banks, now at the forefront of critical concern by their managements and Boards of Directors, US and worldwide regulators, investors and depositors, has now entered a new level of technological analysis that outstrips traditional methods as a result of a development by Invictus Consulting Group LLC, an independent financial risk management and advisory firm.

The Invictus Capital Assessment Model (ICAM™) uses a uniform proprietary methodology that employs publicly available data to independently stress test Tier 1 capital levels over a two-year time horizon, on a comparable basis, for each of the more than 7,500 US banks, including publicly traded and private banks, and US domiciled banks with foreign ownership.
ICAM is currently being used by a growing number of state bank regulators as well as banks themselves.  Invictus is now expanding marketing both in the US and internationally to banks, insurance companies, institutional investors, hedge funds and corporate treasurers.  In addition, Invictus is adapting its methodology and data collection to provide a service for stress testing banks outside the US.

“Unfortunately traditional methodologies for establishing bank regulatory capital levels have been a failure in their forecasting ability,” said Kamal Mustafa, Chairman and CEO of Invictus.  “Our Invictus Capital Assessment Model (ICAM) takes an entirely new approach that has proven to have greater quantitative and predicative capabilities, and is far more useful in assessing the impact of a comprehensive range of assets on a bank’s capital requirements.”

In back testing, ICAM accurately predicted every bank that failed in the US since September 2008 in which the institution did not receive a capital injection.  Invictus’ latest review of US banks, using March 31, 2011 data from public and regulatory filings, predicts:

• More than 400 community banks with more than $150 billion of deposits will need significant additional capital within 12 months.
• Over 1000 additional banks with capital constraints will face asset reinvestment problems (the inability to find suitably priced lending opportunities to replace maturing loans) that may impair their future profitability. 

“This analysis points to a massive consolidation needing to occur in the banking sector over the next several years,” said Mr. Mustafa.  “It also shows that while the US bank industry had been thought to be stabilized for the most part, another big issue lies ahead --especially for banks in economically slow growing communities or those with structural disadvantages, whose ability to earn a satisfactory return on shareholder equity, given current market and interest rate conditions, threatens their viability.”

Invictus’ system differs from traditional analytical systems, which are essentially P&L driven and compensate for discrete events using provisioning adjustments. Invictus analyzes bank capital needs by focusing on all groups of assets that generate bank revenues, and identifying and quantifying the existing and potential degradation in individual bank portfolios.  These include, but are not limited to, loan to asset values, regional probabilities of default, loan origin dates, loan maturity schedules, scheduled loan interest rate reset events, regional factors, liquidity metrics in the context of existing tier 1 levels and competitive factors within the banks geographical footprint.  The application of the methodology across the US banking sector makes the rating and ranking of the banks consistent.

About Invictus

Invictus (www.invictusgrp.com) was established in 2009 as an independent financial risk management and advisory firm.  The Invictus senior management team has a depth of experience in international banking, regulation, information technology, credit, liability management securitization, insurance and investment banking. They recognized that today’s difficult global economic environment renders traditional analytical methods inadequate to evaluate a bank’s capital requirements – and have created a new and superior methodology for the financial services industry that generates a range of analytical reports providing unprecedented insight into the banking sector. Invictus’ advisory services are competitive positioning, merger and acquisition screening, and risk analysis among others. 

Contacts:

In the U.S.

Kamal Mustafa (kmustafa@invictusgrp.com)  
Lenny DeRoma (lderoma@invictusgrp.com)
+1 (212) 661-1999      

In the U.K.

Chris Page (cpage@invictusgrp.com) 
Ian Harvey (iharvey@invictusgrp.com )                                                                              
(+44) 20-7031-8117

 

Media Contacts
Steven Anreder (steven.anreder@anreder.com)
Gary Fishman (gary.fishman@anreder.com)
Michael Shallo (michael.shallo@anreder.com)
Anreder & Company
New York City
+1 (212) 532-3232