When you read the financial statement of a bank, usually you would only understand the terms or some complicated financial products if you are familiar enough with the banking sector.
Having spent a few hours to read it, I could conclude that banking sector is the most complicated industry. Specific terms like Banker Acceptance (link) which would kill your time to study its meaning and working. Although it's difficult, no doubt I have learned something from it.
Bank is really difficult to manage as it acts as an intermediary between buyer and seller. Most of the time, bank is required to be effective and efficient enough. You could imagine how stress the bank managers are. Once the payment is not matched or error occurs, you would responsible for it.
Bank is quite unique in terms of its operation and profitability. Loans should be the most profitable and traditional products the bank has. Once the bank lends out, expected interest would be its long-term income. Also, bank also provides various types of loan business which are in many form like hire purchase, a services which a bank would buy the demanded vehicle for the customer in advance and will be paid based on the interests.
Also, the bank may buy some equipment or assets and lend it out to the manufactures by creating interest based income like rental.
In order to judge a bank, we should look at the long term prospective. Yes, long term game. Banking is a long term game, unlike other sector can boom within a short time. If a bank always acts for short term profit like betting in high-risk securities, you should beware and better not to invest in the bank.
So far, Hong Leong bank is quite complicated in terms of shareholding structure.
Mr Quek is afraid of being eaten by big player?
