Analyzing and Interpreting Bank Financial Statements Primer

Learn how to analyze a bank and why the standard financial analysis and valuation methodologies that apply to most companies do not apply to industries that “use money to make money.” Get a firm grasp on the main banking functions (commercial, investment, asset management) and the quality of book of loans. Analyze net vs. gross charge-offs vs. provisions. Recognize critical credit ratios and capital adequacy analysis and Basel II impact. Understand the impact of interest rates, importance of term structure and credit spreads, and implications on a bank’s profitability. Examine best practices in calculating net interest income via average asset and liability balances on the income statement. Dive into an analysis of balance sheet assets and liabilities as well as the drivers of EPS growth. Wrap up by analyzing valuation parameters and key banking valuation multiples (PE, PEG, Book Value, and ROE).

Prerequisite: Firm grasp of accounting concepts. 

Also Recommended: Bank Financial Modeling on April 21 and How to Analyze a 10-K in Summer 2010.