One firm beats them all, again.

[tonyf]

Liquidity buffer is definitely important. The thesis of the OP is still wrong - profitability is not a sign that a broker is safe to put capital in. In fact, outsized profitability might be a red flag that the firm is selling icecream in the front and crack out the back.

No financial company wants to be in the news for stealing Bill's family farm.

The OP made his money analysing regional banks and underwriting puts against their balance sheets
FCF is what matters more than any other indicator.

 

[newwurldmn]

The OP made his money analysing regional banks and underwriting puts against their balance sheets
FCF is what matters more than any other indicator.

the OP is smart.
But fcf matters as an investor. After you cross the risk of solvency, you don’t want your broker earning any more because it means they are taking on risk (or slightly better: gouging you).

The “best” regional banks in 2004-2007 nearly went under in 2008. All their net interest margin was from loans underwriting overpriced developments in Las Vegas (often 1000 miles from their nearest branch).