When evaluating a banking stock, Ian Tai will look at these three major areas:
Does the bank has a strong balance sheet? Solid fundamentals ensure that the bank can survive during the economic crisis, and have funding to grow their business over time.
Banks are in the business for the long haul. Find banks that are profitable over 10-year. You can better observe whether the bank can make money during both good time and bad time.
If you only look at the past three years, and what if that was during economic good times, then you might misjudge the income-generating ability of the bank.
You will only know who is swimming naked when the tide goes out.
The sequence is to look at the stability and profitability first (No.1 & No. 2 above). Those are the fundamentals. Focus on those first, before focusing on the stock price (valuation). When the price is right — and it will come for some days — you can snap up the opportunity.
Ian Tai showed us more details on what to look for in the annual report, such as:
- Loan, Advances & Financing Assets
- Gross Impairment Loan Ratio (GILR)
- Total Capital Ratio (TCR)
- Loan Loss Coverage Ratio (LLCR)
For paid Premium Webinar Members (PWM), you can check out the full training, notes, Q&A and discussion here: