Source:
Level three to equity ratios
Citigroup
Equity base: $128bn
Level three assets: $134.8bn
Level 3 to equity ratio: 105 per cent
Goldman Sachs
Equity base: $39bn
Level three assets: $72bn
Level 3 to equity ratio: 185 per cent
Morgan Stanley
Equity base: $35bn
Level three assets: $88bn
Level 3 to equity ratio: 251 per cent
Bear Stearns
Equity base: $13bn
Level three assets: $20bn
Level 3 to equity ratio: 154 per cent
Lehman Brothers
Equity base: $22bn
Level three assets: $35bn
Level 3 to equity ratio: 159 per cent
Merrill Lynch
Equity base: $42bn
Level three assets: $16bn
Level 3 to equity ratio: 38 per cent
Now of course, simply because assets are priced at level three does not mean the sky is falling in. Often there is a good reason why they are marked so. But as a broad observation, level three assets are illiquid and therefore carry a certain amount more risk than other readily tradable - and disposable - assets.
Interesting then that two of the banks the market is least worried about - Goldman Sachs and Morgan Stanley - have level three to equity ratios far higher than their suffering peers, Merrill Lynch and Citi.
Citigroup
Equity base: $128bn
Level three assets: $134.8bn
Level 3 to equity ratio: 105 per cent
Goldman Sachs
Equity base: $39bn
Level three assets: $72bn
Level 3 to equity ratio: 185 per cent
Morgan Stanley
Equity base: $35bn
Level three assets: $88bn
Level 3 to equity ratio: 251 per cent
Bear Stearns
Equity base: $13bn
Level three assets: $20bn
Level 3 to equity ratio: 154 per cent
Lehman Brothers
Equity base: $22bn
Level three assets: $35bn
Level 3 to equity ratio: 159 per cent
Merrill Lynch
Equity base: $42bn
Level three assets: $16bn
Level 3 to equity ratio: 38 per cent
Now of course, simply because assets are priced at level three does not mean the sky is falling in. Often there is a good reason why they are marked so. But as a broad observation, level three assets are illiquid and therefore carry a certain amount more risk than other readily tradable - and disposable - assets.
Interesting then that two of the banks the market is least worried about - Goldman Sachs and Morgan Stanley - have level three to equity ratios far higher than their suffering peers, Merrill Lynch and Citi.
One key thing to consider, of course - that these figures don’t reflect - is how well hedged against these level three positions banks’ are. Citi, as was made clear by Gary Crittenden, Citi chief financial officer, in a conference call on Monday, has had trouble in tying down counterparties. Not so for Goldman.
This entry was posted by Sam Jones on Tuesday, November 6th, 2007 at 8:38 and is filed under Capital markets.