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The Key Costs on a Bank's Income Statement (Banks 101 Series)

November 06, 2012 | About:
Certain industries by virtue of their unique characteristics have proven to be stumbling blocks for investors, who are used to reading the financial statements of a typical goods and/or service business. This is one of many in a series of articles where I reveal the nuts and bolts of investing in unique industries like banks etc.

The key costs on a bank's income statement include:



Interest Expense


- Interest paid on deposits and other borrowings.

Provision for loan losses

- Estimate of the quality of a bank's loan portfolios in terms of the quantum and likelihood of loan repayment on a timely basis. It works in a similar fashion to provision for doubtful debts for trade receivables.

Selling, General & Other Administrative Expenses and Other Operating Expenses

- Include staff expenses (wages, bonuses and other benefits), rental expense (occupancy of head office and branch offices) occupancy and depreciation on PCs and other IT systems.

About the author:

Mark Lin
Mark is a private value investor and runs the Cheapskate Investing website which borrows from the wisdom of value investing giants, using a systematic quantitative screening approach to filter the global stock markets for cheap cigar-butts and wide-moat compounders. He is also a regular contributor to various value investing communities.

Visit Mark Lin's Website


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