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# IB balance sheet leverage

Discussion in 'Retail Brokers' started by trading spaces, Nov 3, 2011.

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.

3. ### 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.

4. ### benwm

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?

7. ### 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.