Note on How to Analyze a Bank
(6 pages of text)
This note discusses how to analyze a bank from the point of view of an equity analyst or investor. The note begins by reviewing the evolution of North American banks from narrow to diversified financial institutions and then describes the financial ratios used to evaluate a bank's operating and financial performance. The final section provides examples of these ratios applied to a North American bank, and a set of Canadian and U.S. banks.
This note is suitable for use in both undergraduate and graduate courses as an introduction to banking and financial analysis. The explanations provided in this note are designed to help readers
- analyze a bank's operating and financial performance using financial ratios and market multiples;
- assess the key risks faced by banks; and
- understand banks’ main regulatory requirements.
Finance and Insurance
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