IB balance sheet leverage

[trading spaces]

http://investors.interactivebrokers.com/download/Q3_11_earnings_release.pdf

Page 8

Assets
Total Equity $4.633bn

Liabilities
Senior Notes $125.9m
Short term loans $151.8m

What other liability figures should be used to calculate leverage?

 

[trading spaces]

I make it 0.059 to 1 compared with MFG 40 to 1. Do comment if you think any other figure should be added to IB liabilities.

 

[jeb9999]

You are not looking at balance sheet leverage in the right way.

You want to look at the total of assets that might suffer a significant loss of value versus the capital.

First the asset side. Cash, cash equivalents and well collateralized receivables are not at risk. Of IB's $33 billion in total assets you subtract out $18.7 billion, leaving $14.3 billion at risk.

Next the capital side. Capital is equity plus long term borrowing. $4.633 billion of equity plus $125 million of Senior notes is $4.758 billion.

Leverage is $14.3 billion divided by $4.758 billion equal to 3.00.

 

[benwm]

Quote from jeb9999:


Leverage is $14.3 billion divided by $4.758 billion equal to 3.00.

What is the leverage for MF G on the latest balance sheet (equivalent)? I heard someone say 40-1, another said 80-1?

How do other FCMs compare?

 

[trading spaces]

This article says 33 to 1 for mfg.

http://www.reuters.com/article/2011/11/03/us-mfglobal-corzine-idUSTRE79U0TT20111103


Anybody else want to have a go at working out IB leverage?

 

[benwm]

This article says 80-1 leverage:-
http://www.forbes.com/sites/robertl...ad-mf-global-leveraged-80-to-1/?feed=rss_home

They seem to divide $40 billion assets by $500 million equity capital

 

[catmango]

The 33-to-1 MF ratio comes from dividing aggregate total assets ($45.93B) by total equity ($1.39B). If you do the same to IB the number appears to be a paultry 7-to-1 ($33.15B assets vs. $4.63B equity).

As for the 80-to-1 ratio, this is a total guess, but it looks like they might be taking "Securities purchased under agreements to resell" ($12.06B) plus "Securities owned" ($11.57B) and dividing that total by preferred stock ($130.6M) plus common stock ($164.9M). That yields 80-to-1. Assuming this is accurate, then IB's numbers would be (I think) "Securities purchased under agreements to resell" ($0.46B) plus "Trading assets, at fair value" ($8.88B) divided by $565.7M in common equity. This yields a 16.5-to-1 ratio.

I was also freaked out by IB's numbers initially, but I was getting my balance sheet data from Yahoo Finance, which for some reason is way off the mark.

 

[trading spaces]

Total assets at mfg was european government debt for it's own account, at IB total assets is customer deposits and stock so it is not a fair comparison.

 

[catmango]

Quote from trading spaces:

Total assets at mfg was european government debt for it's own account, at IB total assets is customer deposits and stock so it is not a fair comparison.

So, would my 80-to-1 vs 16.5-to-1 calculation be more apples-to-apples then? Trust me, I'm likewise trying to figure this out because I have a tiny MF account that's currently inaccessible, but I have a substantial account at IB that I'd like to feel comfortable keeping 100% there.

Best.

 

[catmango]

MF Global's ER

http://www.elitetrader.com/vb/attachment.php?s=&postid=3351439