When evaluating a bank's stock, do you look at assets as "sales"?

Question

When evaluating sales growth of a bank, is it best to look at asset growth as the closest equivalent to "sales?"

Answer 1

The 2nd responder is closer to the truth than the 1st. Since banks do not have sales, about the only thing that is important is income. But as one might compare income to sales for a company that sells things, so with a bank one can compare income to assets as a relative comparison among banks to determine how well the assets are employed. One must keep in mind that the assets of a bank are not equivelent to the assets of a non financial company.

Lets take a couple of examples:

BAC C BBT
assets 1.292 t 1.494 t 109 b
revenue 85 b 120 b 7.8 b
income 16.5 b 19.8 b 1.7 b

revenue/assets 6.5% 8.0% 7.2%
income/assets 1.3% 1.3 % 1.6%


What do we see from this? BBT is considerable more profitable in terms of return on assets 23% more. We also see that C is not bringing much of their revenue down to the bottom line.


Sorry about the columns not lining up. Apparently Yahoo is deleting imbedded spaces for some reason.

Answer 2

That is a complicated question. Are you looking at revenue growth through sales? Or are you looking at some kind of cash from operations? For banks in particular you will need examine how likely a buyout is for a firm, either being bought or buying someone else. Financing decisions also play a large roll. The bank could have great asset growth that is fueled by debt. If this is the case you need to look at how the bank is using the debt.

Answer 3

Another word for "sales" is "revenues". Go to the income statement to find "revenues". Assets are found on the balance sheet and do not measure revenues or sales.

To evaluate the bank's stock, you can look at its PE Ratio and other traditional ratios that are tracked by investors. Punch in the symbol at Yahoo Finance and it will give you information.

Answer 4

One thing missing from these answers is that for a bank their assets are the loans they've made. Conversely, their liabilities are the deposits they have from folks like us. That may seem upside down, but recognize that a deposit from a customer must be given back to the customer on demand, hence it's a liability, and the bank's investments are loans that they then make and on which they earn interest.

Answer 5

No assets are not sales. Sales are income received and assets are things like their buildings, computers, and of course, cash on deposit.
You need some basic accounting knowlege. Don't invest until you know a little more.