Bank Investing

Bank Investing: A Practitioner's Field Guide offers you the essential toolkit to become a successful bank investor. It packages practical lessons, theoretical knowledge, and historical context, all into one compelling and hopefully entertaining book. The book includes conversations with investors and management teams. Investors include activists, financials specialists, credit investors, and multibillion-dollar asset managers. Management teams have a broad representation from the c-suite of a broad spectrum of participants ranging from a fintech to a bank with over $30bn in assets.

Banks are the oil that lubricates the economy. An understanding of how they operate is essential for analyzing any part of the economy since banks represent a large investing universe and control a sizeable portion of assets. With over 800 public tickers representing over $3 trillion market cap, banks are larger than several other industry groups. Banks are the largest financial intermediaries in the U.S., controlling $15 trillion in financial assets. Their relative size can amplify effects. For example, a small regulatory or environmental change can cascade and ripple through financial markets and have a major impact on the economy.

As fintechs gain in prominence, a fundamental grasp of topics related to banking will help enhance understanding of fintech.

Bank investing can be a fruitful pursuit:

• The most successful investor of our times, Warren Buffett, has had a sizeable investment in banks over time (close to a third of his portfolio weight used to be in banks).
• Banks allow you to make macro-economic bets since they are highly levered to business cycles.
• Bank investing allows you to scale your knowledge, as they have relatively homogenized business models...
• ...at the same time, banks are diverse enough to drive meaningful dispersion in price performance. This divergence of performance can be taken advantage of by an astute and prepared securities analyst.
• Banks are good vehicles to make specific investment plays on geographic regions, demographic trends (suburban to urban migration, aging), industries (agriculture, tech, energy), news flow (trade/tariffs, weather), real estate subsectors (NYC office, bay area apartments), and investing themes such as ESG, cryptocurrency, and venture capital.
• Finally, fintech disruption is creating an investing opportunity to play the digital divide between banks that embrace technology successfully and those that get left behind.

Foreword

Acknowledgments

Chapter 1: Introduction

Chapter 2: Financial Statement Analysis

Chapter 3: Capital

Chapter 4: Credit

Chapter 5: Valuation

Chapter 6: Regulation

Chapter 7: Rates and Central Bank

Chapter 8: M&A

Chapter 9: Cycle

Chapter 10: Conversations

Appendix

About the Authors

SUHAIL CHANDY manages the Fintech Catalyst strategy at Penn Capital and covers the Fintech, Financials, and Real Estate sectors. He is a CFA charterholder and has an MBA from Yale University.

WEISON DING is Director at Piper Sandler, a leading investment bank in the FIG sector. He provides research, capital market, and trade execution resources for buy side clients. He graduated from The George Washington University.

Banks are the oil that lubricates the economy. Because of their overwhelming size and the critical role they play, banks have an outsized impact on the economy and capital markets. An understanding of how they operate is essential for analyzing any part of the economy.

Bank Investing: A Practitioner’s Field Guide delivers an essential and invaluable exploration of how to become a successful bank investor. The book combines practical lessons, theoretical knowledge, and historical context into a single, powerful, one-stop resource for anyone interested in the intersection of banking, capital markets, and the wider economy.

The book includes conversations with Founders, Chairmen, CEOs, CFOs, CIOs, Analysts, Portfolio Managers, and Strategists across a broad spectrum of market participants—banks and fintech with market caps ranging from $200M to $7B; activists, hedge funds, financial specialists, equity, credit, and cross capital structure asset managers with AUM well over a trillion dollars. Engaging and informative, this reliable resource will help you answer a variety of essential questions:

Curious about getting a legal edge even before the earnings release by a bank?

Why would someone invest in the holdco debt of a defunct bank?

What are the factors to watch to track business cycles?

How do activists run successful campaigns?

How do you calculate a quick and dirty EPS estimate for a bank?

What are the drivers of bank M&A?

How do you build a quick M&A model?

What are some of the items credit and bank investors monitor?

Is your bank adequately capitalized?

Whether you are an astute and prepared generalist, securities analyst, family office investor, director of a community bank, or a fintech investor wanting to enhance your understanding of banking, this book will help you gain a better perspective of the drivers of value for a bank and explain why there can be meaningful dispersion in price performance in what is viewed as a somewhat homogenous sector.

Praise for BANK INVESTING A PRACTITIONER’S FIELD GUIDE

“A great book not only for bank investors but for anyone interested in learning about the inner workings of a banking institution—wish I had this when I started my career.”
—Raj Singh, Chairman, President, and CEO, BankUnited

“Suhail Chandy’s background as an equity and credit investor in banks, fintech, and real estate places him at the confluence of three sectors. This perch gives him a unique vantage point. He has distilled his learning into the definitive guide on bank investing, balancing theoretical background, historical perspective, and practical advice.”
—Alan Lane, President and CEO, Silvergate Capital Corporation

“I’ve always respected the investor savvy and integrity of Suhail Chandy. Throughout my career, I’ve appreciated how the commercial banking industry has enabled me to serve the entrepreneurs who create jobs and healthy communities. In this book, Chandy and Ding provide excellent, up-to-date insight on this fascinating industry and the financial system in total.”
—Keith Cargill, Co-founder and former CEO, Texas Capital Bank

“I consider this book by Chandy and Ding to be a must-read for CEOs and CFOs of financial institutions that are public or are considering an IPO. Topically, they address investor perspectives on the pertinent factors, including financial fundamentals, strategic considerations, and the optics surrounding M&A opportunities. Their views are balanced and comprehensive. The interviews conducted are particularly enlightening and entertaining.”
—Claire Tucker, Founding President and CEO Emerita, CapStar Bank

“A practical guide for cutting through the noise to identify the key drivers of what drives long term success in bank stocks. Soon to be the bible for all those interested in bank investing.”
—Edward Barry, CEO, CapitalBank

“Suhail’s unique perspective as a bank, fintech, and real estate investor across the capital stack underpins this compelling, multi-dimensional work that serves as a practical ‘how-to’ guide, while providing the historical ‘why’, greatly benefiting the many constituents of the banking industry. This book simultaneously and masterfully accomplishes the dual tasks of industry introduction for the beginner and advanced discussion of nuanced topics for the most seasoned professional, a truly difficult feat!”
—Christopher J. Black, former Chief Financial Officer, Franklin Financial Network