Can anyone recommend any literature that would be a useful guide on the banking business and financials in general. Analyzing bank stocks requires a lot of specific knowledge and i think it would be great to read through a guide or book that would help gain better knowledge on this.
for example we learnt regarding the leverage adjusted duration gap for banks in cfa level 3 but i for example have not seen this ratio quoted for banks generally, not sure why that is
I think the best thing to read would be research notes from analysts covering the sector. Not always easy to access of course.
If you pass me your e-mail, I have a few guides to banking/bank stocks written by different SS ER firms.
Any good book about cooking will do!
Go to the cfai website and search “industry guide.” There are guides on there that teach out about the banking industry, automotive, oil, tobacco, and maybe a few others
Those guides are very good.
link i want to read.thx
call rawraw
Depends what you want to know. Valuation can be found here people.stern.nyu.edu/adamodar/pdfiles/papers/finfirm09.pdf and http://www.mch-inc.com/pdf/AFG%20Res%20Comp%20-%20Valuing%20Community%20Bank%20Stocks%20-%20DBMoore.pdf.
If you want to learn about the business, every bank regulatory agency (OCC, Fed, FDIC) plus the states all put out guides on banking. For the OCC, look at CEO memos. From the FDIC, look at supervisory insights. These tend to be more interesting to read than the manuals of exams, which are comprehensive books on the different things banks do and how they work (for example https://www.occ.treas.gov/publications/publications-by-type/comptrollers-handbook/allowance-loan-lease-losses/index-ch-allowance-loan-lease-losses.html). If you want to learn the accounting, the call report has a glossary that is useful (https://www.fdic.gov/regulations/resources/call/crinst/2011-09/911gloss_093011.pdf). Also, a lot of the investors in banks don’t have a good understanding of the companies besides just being able to talk NIMs and past due ratios. That stuff is necessary, but the whole risk in banking is when the numbers don’t show the crazy stuff they are doing. I’d recommend making friends with people who have been in roles that exposed them to the various silos of banks (managers of banks, consultants, or regulators) to really understand the business. It’s hard to understand how banks work from the outside past a superficial level
BTW duration gap is not very useful because of the betas associated with accounts. Duration gap, typically called the gap ratio by bank guys, just measures the volumes of repricing assets and liabilities. But if the rate at which they reprice is vastly different (say assets are 100% of market and liabilities are 1% of market), then a negative duration gap could still produce an asset senstive balance sheet.
thank you guys, very useful materials!