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REVENUES THAT DRIVE BANK STOCK EARNINGS |
| Like most investors, RASARA prefers to invest in companies that demonstrate the potential to generate sustainable earnings growth. When it comes to bank stocks, earnings come from two types of revenue streams: net interest revenue and non-interest revenue. |
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Net Interest Revenue Sources
Banks derive net interest revenues from:
Net interest revenue results from the difference by income generated by the rates charged on these loans and the cost of interest bearing funding sources such as deposits and other short term borrowings.
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Non-Interest Revenue Sources
The key drivers of non-interest revenue at banking companies and financial services firms are:
Other sources of non-interest revenues, which may be more characteristic of specialized and/or larger capitalization banks, include foreign exchange and bond trading activities.
Different types of banks have different combinations of revenue streams.
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TRADITIONAL BANK
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DIVERSIFIED BANK |
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SPECIALIZED BANK |
Net-Interest Revenue |
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Net-Interest Revenue |
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Net-Interest Revenue |
| 75% - 80% |
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50% - 75% |
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less than 50% |
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Non-Interest Revenue |
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Non-Interest Revenue |
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Non-Interest Revenue |
| 20% - 25% |
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25% - 50% |
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more than 50% |
RASARA has historically weighted its investment allocation to approximately 70% in diversified and specialized banks and 30% in traditional banks.
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