Book description
Bank Investing: A Practitioner's Field Guide offers you the essential toolkit to become a successful bank investor. It packages practical lessons, theoretical knowledge, and historical context, all into one compelling and hopefully entertaining book. The book includes conversations with investors and management teams. Investors include activists, financials specialists, credit investors, and multibillion-dollar asset managers. Management teams have a broad representation from the c-suite of a broad spectrum of participants ranging from a fintech to a bank with over $30bn in assets.
Banks are the oil that lubricates the economy. An understanding of how they operate is essential for analyzing any part of the economy since banks represent a large investing universe and control a sizeable portion of assets. With over 800 public tickers representing over $3 trillion market cap, banks are larger than several other industry groups. Banks are the largest financial intermediaries in the U.S., controlling $15 trillion in financial assets. Their relative size can amplify effects. For example, a small regulatory or environmental change can cascade and ripple through financial markets and have a major impact on the economy.
As fintechs gain in prominence, a fundamental grasp of topics related to banking will help enhance understanding of fintech.
Bank investing can be a fruitful pursuit:
- The most successful investor of our times, Warren Buffett, has had a sizeable investment in banks over time (close to a third of his portfolio weight used to be in banks).
- Banks allow you to make macro-economic bets since they are highly levered to business cycles.
- Bank investing allows you to scale your knowledge, as they have relatively homogenized business models...
- ...at the same time, banks are diverse enough to drive meaningful dispersion in price performance. This divergence of performance can be taken advantage of by an astute and prepared securities analyst.
- Banks are good vehicles to make specific investment plays on geographic regions, demographic trends (suburban to urban migration, aging), industries (agriculture, tech, energy), news flow (trade/tariffs, weather), real estate subsectors (NYC office, bay area apartments), and investing themes such as ESG, cryptocurrency, and venture capital.
- Finally, fintech disruption is creating an investing opportunity to play the digital divide between banks that embrace technology successfully and those that get left behind.
Table of contents
- Cover
- Title Page
- Copyright
- Dedication
- Acknowledgments
- Disclaimer
- About the Authors
- CHAPTER 1: Introduction
- CHAPTER 2: Financial Statement Analysis
-
CHAPTER 3: Capital
- CAPITAL FOR A BANK
- CAPITAL LEVELS
- CAPITAL STRUCTURE FOR A BANK
- MEASURES OF CAPITAL
- REGULATORY CAPITAL
- CAPITAL EROSION
- CAN CAPITAL RATIOS SERVE AS A PREDICTOR OF BANK FAILURES?
- MARKET VIEWS ON CAPITAL
- BANK TRADING BELOW TANGIBLE BOOK
- FIRST NBC BANK HOLDING COMPANY
- LEHMAN BROTHERS
- REGULATORY COMPLEXITY
- UNICREDIT – CASHES
- HSBC – DISCOS
- OTHER DISPUTES
- REVISITING ELEMENTS OF THE REGULATORY CAPITAL STACK
- AOCI
- QUALIFYING MINORITY INTEREST
- PREFERRED STOCK
- SBLF
- TARP
- SUBORDINATED DEBT
- ADVANTAGE HOLDCO CREDITORS IN BANKRUPTCIES?
- WHAT DOES THE HOLDCO HAVE THAT COULD BE VALUABLE TO THE HOLDCO CREDITORS IN A BANKRUPTCY?
- HAVE THESE ARGUMENTS HELD UP IN COURT?
- LIQUIDITY
- LIQUIDITY COVERAGE RATIO (LCR)
- NET STABLE FUNDING RATIO (NSFR)
- BAIL-IN RISK
- RISK WEIGHTING
- RISK WEIGHTINGS FOR MAJOR ASSET CATEGORIES
- ADJUSTMENTS
- THRESHOLDS FOR CAPITAL CONSTRAINTS AND RATIOS
- PCA PROMPT CORRECTIVE ACTION
- ADEQUATELY CAPITALIZED RATIOS
- CAPITAL CONSERVATION BUFFER
- COMMUNITY BANK LEVERAGE RATIO (CBLR)
- DODD-FRANK ACT STRESS TEST (DFAST)
- DFAST 2020: COVID-19 EDITION
- COMPREHENSIVE CAPITAL ANALYSIS AND REVIEW (CCAR)
- EVOLUTION OF CAPITAL RATIOS
-
CHAPTER 4: Credit
- AREN'T HIGHER RESERVES BETTER?
- WHY IS CREDIT SO IMPORTANT?
- CREDIT METRICS
- TEXAS RATIO
- CREDIT QUALITY INDICATORS
- CREDIT QUALITY REGRESSION
- SHOCK SCENARIOS
- GAUGING THE UNDERWRITING PROCESS
- PRICING AND STRUCTURE
- SHARED NATIONAL CREDITS (SNCS)
- HISTORY OF CREDIT
- CONCENTRATION RISK
- HISTORY OF TEAM
- CECL AND ACCOUNTING CHANGES
- WHY CECL?
- WHAT IS CHANGING?
- WHAT WILL BE IMPACTED?
- CECL VS. CURRENT “INCURRED LOSS” APPROACH – AN EXAMPLE
- WILL IT REDUCE PROCYCLICALITY?
- OUR TAKE ON CECL
- CHAPTER 5: Valuation
-
CHAPTER 6: Regulation
- REGULATORY LANDSCAPE
- HAVE REGULATIONS MADE THE BANKING SYSTEM SAFE?
- 1921–1935
- 1982–1995
- 2007–2009
- ARE WE SAFER?
- TOO BIG TO FAIL
- FEDERAL PRUDENTIAL REGULATORS
- FDIC INSURANCE
- CAMELS
- KEY REGULATIONS
- STRESS TESTING
- CROSSING THE $10 BILLION
- CHANGES FROM THE ECONOMIC GROWTH ACT
- REGULATORY EXAMS
- SNC EXAM
- WHEN IS A BANK DEEMED TO BE TROUBLED?
- INFORMED IN WRITING?
- RELATIONSHIP WITH THE REGULATOR
- WHAT CAUSES A BANK TO FAIL?
- MISCELLANEOUS TOPICS OF RELEVANCE TO INVESTORS
- SEC FILING REQUIREMENTS
- CHANGE IN BANK CONTROL ACT (CBCA)
- BANK HOLDING COMPANY ACT (BHCA)
- SWITCHING REGULATORS
- SHEDDING THE BHC
- S CORP BANKS
- FINTECH CHARTER
- UTAH INDUSTRIAL BANKS (INDUSTRIAL LOAN COMPANY ILC)
- REGULATION O
- KEY REGULATIONS FOR COMMUNITY BANKS
- CANADA
-
CHAPTER 7: Role of the Central Bank and Interest Rates
- ROLE OF THE CENTRAL BANK
- THE FEDERAL OPEN MARKET COMMITTEE (FOMC)
- EXTRAORDINARY MONETARY MEASURES
- NEGATIVE INTEREST RATES AND THE EVENT HORIZON
- EXTRAORDINARY MONETARY MEASURES PART II
- THE U.S. TREASURY MARKET
- MONETARY THEORIES
- INTEREST RATES
- ARE HIGHER INTEREST RATES BETTER FOR BANK STOCKS?
- HOW DO INTEREST RATES AFFECT PROFITABILITY?
- PARALLEL SHOCKS AND A NOTE ON MANAGEMENT DISCLOSURES
- INTEREST RATE SENSITIVITY AND BUSINESS MIX
- INTEREST RATES AND LOANS
- INTEREST RATES AND DEPOSITS
- CHAPTER 8: M&A
-
CHAPTER 9: Cycle
- BANK SENSITIVITY TO CYCLES
- BULL MARKETS DO NOT DIE OF OLD AGE
- NBER – THE CYCLE'S TIMEKEEPER
- THIS TIME IS “RARELY” DIFFERENT
- INVERSION OF THE YIELD CURVE
- HIGH YIELD SPREADS
- TED SPREAD
- FRA–OIS
- REPO RATES
- UNEMPLOYMENT RATE
- OTHER INDICATORS TO TRACK
- BUSINESS CYCLE INDICATORS
- CREDIT CYCLE INDICATORS
- INFLATION MEASURES
- REFLEXIVITY AND SELF-FULFILLING PROPHECIES
- VALUATION
- CHAPTER 10: Conversations
- Appendix
- Index
- End User License Agreement
Product information
- Title: Bank Investing
- Author(s):
- Release date: March 2021
- Publisher(s): Wiley
- ISBN: 9781119728047
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