A bank takes in deposits from customers who establish checking accounts, savings accounts, fixed deposit, and other products. The institution then lends these funds to consumers who apply for mortgages, business loans, credit cards, personal loans, and many other projects.
Bank make profits from the difference between what they pay out in interest to the depositors, and the interest income on the loans they underwrote for customers.
An important lesson to learn here:
Do you get rich by depositing money in the bank, or by becoming the owner of a bank?
I had attended the Annual General Meeting of Public Bank before. It was so packed that I had to park my car several blocks away. Furthermore, I couldn’t even squeeze into the meeting hall.
Compare someone who deposited money in Public Bank back in 1967, to someone who bought the shares of Public Bank when it first listed then, the shareholder is much wealthier now. Most of them are millionaires.
No doubt that banks are essential services to keep the economy running. We couldn’t imagine how we will handle money without a bank. However, looking at how the banks operate as a highly leveraged business, investors have to be extra careful.
First, you want to be a smart investor by discovering:
– Three things to look for in a Bank Stock.
– How to interpret financial statements of a bank like a pro.
– How to separate good bank stocks from the bad ones.
– Three valuation methods to assess a bank stock.
Watch the webinar recording below, featuring Ian Tai from DividendVault.com
- Complete the relevant exercise in the PWM Personal Finance Workbook
- Post a comment below: are you a bank’s shareholder or depositor?