After reviewing several sources and drawing upon the best recommended practices, some simple strategies and written materials were presented in the workshop. This article summarizes much of the material so that readers can approach banking stocks with a little more understanding. Bank Operations Let's begin by thinking about what banks do. The basic business of banking is buying and selling money. They collect deposits, then lend those dollars to customers.
Banks buy money, so interest expense is like the cost of goods sold.
Banks sell money, so interest income from loans and investments represents income. Banking is undergoing a basic regulatory change and, due to competition outside the banking industry, such as investment services, credit sources, charge cards, etc., non-interest income is becoming increasingly important to banks. This new avenue of growth could be the basis of a bank's increased profitability and equally important, it is a revenue source that is less susceptible to the economic cycle. Key Banking Terms Readers will need to familiarize themselves with some key banking terms in order to effectively use reported data for SSG analysis. A glossary of key banking terms has been included for your use.