Consequently, its retail banking operations have been separated from the rest of the business and the entire U. Ring-fencing is the largest structural reform imposed on U.
The Internet Industry If there is one industry that has the stigma of being old and boring, it would have to be banking; however, a global trend of deregulation has opened up many new businesses to the banks.
Coupling that with technological developments like internet banking and ATMsthe banking industry is obviously trying its hardest to shed its lackluster image. There is no question that bank stocks are among the hardest to analyze.
Many banks hold billions of dollars in assets and have several subsidiaries in different industries.
A perfect example of what makes analyzing a bank stock so difficult is the length of their financials - they are typically well over pages. While it would take an entire textbook to explain all the ins and outs of the banking industry, here we'll shed some light on the more important areas to look at when analyzing a bank as an investment.
There are two major types of banks in North America: Regional and Thrift Banks - These are the smaller financial institutions, which primarily focus on one Banking industry retail assets area within a country. Southeast, Northeast, Central, etc.
Providing depository and lending services is the primary line of business for regional banks. Major Mega Banks - While these banks might maintain local branches, their main scope is in financial centers like New York, where they get involved with international transactions and underwriting.
Could you imagine a world without banks? At first, this might sound like a great thought!
But banks and financial institutions have become cornerstones of our economy for several reasons. They transfer risk, provide liquidityfacilitate both major and minor transactions and provide financial information for both individuals and businesses.
Running a bank is just as difficult as analyzing it for investment purposes. A bank's management must look at the following criteria before it decides how many loans to extend, to whom the loans can be given, what rates to set, and so on: Capital Adequacy and the Role of Capital Asset and Liability Management - There is a happy medium between banks overextending themselves lending too much and lending enough to make a profit.
Interest Rate Risk - This indicates how changes in interest rates affect profitability. Liquidity - This is formulated as the proportion of outstanding loans to total assets. Asset Quality - What is the likelihood of default?
Profitability - This is earnings and revenue growth. Perhaps the biggest distinction that sets the banking industry apart from others is the government's heavy involvement in it.
Besides setting restrictions on borrowing limits and the amount of deposits that a bank must hold in the vault, the government mainly the Federal Reserve has a huge influence on a bank's profitability. To learn more about the Fed, read the Federal Reserve Tutorial.
Because interest rates directly affect the credit market loansbanks constantly try to predict the next interest rate moves, so they can adjust their own rates. A bad prediction on the movement of interest rates can cost millions.
This refers to the difference, over time, between the assets and liabilities of a financial institution. A "negative gap" occurs when liabilities are higher than assets. Conversely, when there are more assets than liabilities, there is a positive gap.
When interest rates are going up, banks with a positive gap will profit. The opposite is true when interest rates are falling. A bank's capital, or equity, is the margin by which creditors are covered if the bank has to liquidate assets. The following are the current minimum capital adequacy ratios: The risk weighting is prescribed by the Bank for International Settlements.
For example, cash and government securities are said to have zero risk, whereas mortgages have a risk weight of 0. Multiplying the assets by their risk weights gives the total risk-weighted assets, which is then used to determine the capital adequacy.The Boston Consulting Group January T hroughout more than two years of financial crisis and economic turmoil, the retail business has proved to be an irreplaceable source of stability for most banks.
Among the key financial ratios, investors and market analysts specifically use to evaluate companies in the retail banking industry are net interest margin, the loan-to-assets .
This massive annual report combines the results of a major global research study with insights crowdsourced from a panel of financial services influencers, industry analysts and banking .
If there is one industry that has the stigma of being old and boring, it would have to be banking; however, a global trend of deregulation has opened up many new businesses to the banks.
Coupling. Industry-Specific Investment Banking Interviews: How to Prepare for Interviews with FIG, Oil, Gas, Mining, and Real Estate Groups. It is usually not that specific or formalized. If you’re in an industry group, you will tend to work on all different deal types.
Maybe some people will focus a bit more on one deal type than others, but it’s not as if one person will only do M&A deals within energy.