Banking

Overview

Banking represents a core financial service in a robust economy. It serves as a vital financial intermediary between savers and consumers/producers.

As a firm, a bank can be analyzed in the same fashion as any other firm, however, there are additional complexities.

Bank Data

Bank Data : As public companies, data such as financial statements and stock prices are available for banks. However, due to the systemic risk nature of the business, banks are required to submit additional financial reporting requirements, which provides an additional source of data.

Basic Analytics

• Financial Statement Analysis - analysis of a banks financial statements.
• Performance Measures - common measures used to gauge the performance of banks.
• CAMELS : analysis refers an analysis performed on banks, usually to determine their credit worthiness.
• Bank Valuation : addresses the issues that are unique to a bank when performing a valuation
• Microeconomics of Finance and Banking :

Banking Models

Banks can be viewed as the sum of two different businesses, the asset business and the fee business, and managed using risk.

• Fee Based Business is the part of the business that makes money by colllecting fees. This would include whatever fees are collected on deposits, such as minimum balance fees and overdraft fees, and fees associated with its loan orgination and servicing.
• Asset Based Business is the part of the business that makes money off the spread of its assets income and the interest expense of its liabilities. Addresses bank funding.
• Banking Risk - measuring and managing enterprise risk for a bank is different from other types of companies, and focuses largely on financial risks that most companies do not face.

Additional Topics

• Trading Models : are models that use only the information available to traders to determine which banks to buy or sell.
• US Banking Regulations :