The Hamilton Financial Index

By Matt McDonald, mmcdonald@hamiltonps.com, 202-822-1205

Read the full report here.

The Hamilton Financial Index (HFI) combines both financial stress, represented by the St. Louis Financial Stress Index, and industry-level capitalization, represented by the Tier One Common Capital ratio, to provide a clear snapshot of the safety and soundness of the financial services sector. The key findings are:

• Currently, the HFI shows that financial institutions are significantly safer today with a score of 1.28, 28 percent higher than historical norms.
• The rise in the HFI reflects growth in capital. If capital levels remained at pre- crisis levels, the HFI would be below pre-crisis norms with a reading of 0.95.
• U.S. banks Tier One Common Capital ratio is 12.6 percent, a year-over-year increase of 1.3 percent.
• U.S. banks Tier One Common Capital increased to $1.13 trillion.
• The ratio of Risk-Weighted Assets to Total Assets fell 1.3 percent year-over-year.
• Financial stress declined in the fourth quarter of 2012.

Matt McDonald is a partner at Hamilton Place Strategies and a veteran of three Presidential campaigns and the White House. Prior to joining HPS, Matt worked for McKinsey and Company. He holds an MBA from MIT’s Sloan School of Management and a degree in economics from Dartmouth College.

Patrick Sims is a Director of Research at Hamilton Place Strategies. Prior to joining HPS, Patrick acted as the lead research analyst in the financial institutions’ group at SNL Financial and worked for the CFA Institute. He is a finance and international business graduate of James Madison University and studied EU Policy at the University of Salamanca, Spain.

Russ Grote is an analyst at Hamilton Place Strategies. Prior to joining HPS, Russ conducted field research on the economic development in the EU. He holds a BA from the University of North Carolina at Chapel Hill.