Leverage Ratio of Financial Institutions ~ market folly

Wednesday, October 8, 2008

Leverage Ratio of Financial Institutions

I wanted to post up this image (courtesy of Paul Kedrosky), because it illustrates the amount of leverage employed at various financial institutions. Numerous institutions on this list have high leverage. And, the scary part is that many of them have increased leverage from 2007 to 2008.

(click to enlarge)

Then, take the info above and compare it to a list from my previous post on financial institutions regarding writedowns, losses, and capital raised. Although the data is very generalized and does not offer specifics into each institution's situation, it still provides us with a list of some banks that would make very good shorts assumming the short selling ban on financials is not in place. After all, a mix of high leverage, large writedowns, and low capital raised can be quite deadly.

(click to enlarge)

Full disclosure: At the time of publication, MarketFolly was short HBC via puts
Leverage Image Source: Paul Kedrosky

blog comments powered by Disqus