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

Assignment


KCLau
KCLau

Financial educator, author and trainer

    5 replies to "How to Invest in Bank Stocks – Public Bank"

    • Desmond Low

      Hi Ian, KC,

      Thanks for the time spent in doing the case study and summarising Public Bank stocks in a nutshell. Surely, there’re many aspects to look at when one particular stock is being evaluated.

      One question if I may: If you are only allowed to look at 3 key elements/ratios, what would they be? I fully understand that to make the best stock investment decision would mean doing a 150% evaluation, but if one is to take risk (as there will always be risks) and only look at 3 (kind enough not to ask to pick one!), what would they be?

      I’m interested in understanding how would an investor like yourself think. Many thanks in advance.

      • Ian Tai

        For me, it would be Return on Equity (ROE), P/E Ratio, and Dividend Yield. That would be my top three. 🙂

    • Jeff Lim

      Hi Ian/KC,

      Based on the last part of the estimated calculation on the ROI on the bank stock, can you share the template on the calculation on the estimate capital gain return? Thanks.

    • Armengsk

      Hi KC, the notes in Google Doc format can’t be opened with Ms. Word after downloading a copy. Appears to be fine only when opened with Google Doc. Could you verify that and re-upload a workable version in Ms. Word?

      Thanks.

      • KCLau

        The original format of the file is a Google Doc. When you open the link, it pops up a Google Doc. Then you can download as Ms. Word, or PDF.
        I couldn’t produce a Ms Word for you as I don’t use that software.

Leave a Reply

Your email address will not be published.