The Problem

The entire banking system has gone through a series of financial shocks that have drastically reduced regulatory capital levels. Banks continue to hemorrhage capital during this recession and jobless recovery due to reduced asset quality. Generally accepted financial analytical methodologies do not provide the clarity investors need in order to forecast bank sustainability and performance.

Traditional capital adequacy and performance rating systems — perfectly adequate during normal economic climates — fail in today’s stressed environment. In light of today’s razor thin regulatory capital cushions, combined with asset portfolios sensitive to deterioration, existing methods no longer provide investors and acquirers with the comfort and accuracy they need to make sound and profitable decisions. Typical research does not reflect the potential future shocks to banks’ balance sheets.

Research generally available to investors and acquirers today understandably focuses on the interaction of three primary quantitative elements of a bank: 1) Assets and asset quality, 2) earnings, and 3) capital. All primary measurements — whether return on assets, return on capital, earnings per share, P/E ratios, or earnings forecasts — for the most part relate to these three primary elements. The resources from which the research is generally drawn consists of SEC or audited financial data and publicly available governmental data such as FDIC call reports.

As a result, when investors make investment decisions they are generally viewing the target bank’s future performance the way security analysts do — by relying on the ratios and metrics listed above.

However...

What if the information that forms the basis for computing those ratios is incomplete or wrong? Unavoidably, it will lead to inaccurate conclusions and unprofitable investments.

The Answer

The Invictus methodology uses analytical techniques similar to conventional ones, but with a critically important additional metric that significantly alters and sharpens the investment valuation: All computations must include the potential degradation in regulatory capital. This factor affects the level of assets, the amount of earnings, and the bank’s regulatory capital — every number needed for the analytical computation of a bank’s stand-alone and peer-comparative performance. This is the only indicator of a bank’s true sustainability and future competitive position.

The Invictus methodology greatly improves the way investors evaluate and rank bank profitability and performance. In the company’s experience, it is virtually impossible to engage in a capital commitment transaction, smartly and prudently, without using output of the kind provided uniquely by the ICAM model. Only with this information can an investor accurately rate, rank or analyze banks and forecast their future performance.

Services

• Application of the ICAM "public data" model is made to a universe of banks, allowing a general ranking of potential investments or trading decisions.
• Where greater detail is required, the ICAM runs additional data and stress assumptions in order to provide deeper analytical reporting.
• Monitoring of existing portfolio investments is available to assist in trading decisions.
• Surveys of user-defined and Invictus-defined groups of banks can be made in order to quickly ascertain relative rankings.

Invictus Research services are available on an individual bank basis, portfolio basis, or user- defined basis. Invictus Research accommodates changing economic scenarios and altered stress assumptions. Research is available on a subscription basis or custom basis.

Let Invictus show you a revolutionary way to define your portfolio and meet your financial objectives.