Hello,
I am an equity research analyst in a boutique sell-side research firm. I focus on generating and working on general short ideas. However, until now, I have not had a chance to analyze a publicly traded bank stock.
Any recommendation on what books to buy to analyze bank stocks? I bought a few airline financial books two years ago when I was focussing on the airline sector, it was quite helpful.
Thank you in advance, Laks
Try here: https://www.wallstreetoasis.com/forums/working-in-fig-financial-institu…
Read http://csinvesting.org/wp-content/uploads/2012/07/analyzing_and_investi…</a" title="Investing In Community Bank Stocks">this and you will be fine.
Thank you for your link. This should help me to get going.
http://csinvesting.org/wp-content/uploads/2012/07/analyzing_and_investi…
Best guide you'll find.
Thank you. The link is helpful. Do you know any books to help me with Bank & Financial Institution Modeling? I need to get one model out by end of Sunday! Any help will be appreciated.
What type of modeling are you doing? Merger model? DCF? If there are any specifics you are struggling with, feel free to ask here or PM me.
Thank you for your response. I am doing basic I/S and B/S modeling for a bank (projecting for the next four Qs) as well as DCF. This is my first time doing modeling for a Bank.
Gotcha, that shouldn't be too bad, just go quarter by quarter holding most of the balance sheet item ratios constant (for example, if you grow loans at 5% and you want your projected reserves, just hold the initial ratio of reserves to loans constant). The DCF, or I guess DDM, is straightforward once you have your B/S and I/S done. Pick a minimum TCE / TA ratio or leverage ratio and pay out any excess capital each period, then whatever is leftover is your cash flow that you discount.
Is there any specific part of it that you are struggling with? How big is the bank? If you are modeling Bank of America or something, we might be outside of my wheelhouse, but if it is just a regional or big community bank, I'm happy to provide pointers.
Yah what kind of bank stocks are you analyzing? And just so you know, DCF's aren't common in bank valuation. UFCF won't be indicative of anything because banks thrive off of deposits, savings, MMKT's, CD's, and advances. They also don't grow based on CAPEX, so a DCF isn't your go too.
Re: DCF and how to value, also would recommend reading Damodaran's thoughts on valuing financial institutions: http://people.stern.nyu.edu/adamodar/pdfiles/papers/finfirm09.pdf</a">Daddy on FI's
Another good primer
https://static1.squarespace.com/static/5325c4b3e4b05fc1fc6f32ed/t/5baf5…</a">Link
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