How to know if a bank is going to do well in future?

When everything seems fine we observe there's sudden change in demand and supply of a bank's share. As a stocks-trader we want to know more and more about the bank's image in the market, it's stocks demand and supply condition. We want to know if the bank is going to do well in future so that we can earn certain amount of from it. How will you do that?

Well, it start with basics first. You try to know about a bank's current position. That is you study it's financial statements. The financial statement provides you necessary information about how bank is doing financially. You will know it's earning, expenses, profits, dividend provided, retained earnings and many more. Knowing these information is much more important if you don't want to follow over all market flow and want to do what seems to a possible profit oriented decision for you. The important part of this study is to find how bank is doing financially and acquire the information about increase in the banks earning from previous year in each share. This is important because two merged bank will definitely have more income but per share income could be less if properly analyzed. The status of the earning per share is important while determining the current position of bank in the eye of common stock traders.

Common stock traders are interested in making money from the share they are trading and the ability of a bank to earn money will definitely change the decision that people make while purchasing stocks of a bank.

Second thing is the use of the available information technology to gain information about the condition of a bank. A poorly performing bank and a efficiently performing bank has huge impact on the bank's stock. A bank whose investments are being defaults, current performance is low, investments are providing very less return on investment and other image degrading news will provide strong support for buyers not to purchase the stock. This leads to a decline in the share price.

Thirdly staying updated: News, Information from friend, information from people you know and information that might induce appreciation in share price like possible merger approval for banks from central bank of Nepal. Information like this will rise the price of the stock and increase in the value provide more return from the investment.

Even though you do everything you could and follow everything stated above we are never going to predict precisely what will happen next. We will not be able to say what will be the price of the stock of a particular bank two days from now or three days form now. But we can still do what we all always do, predict and this time our predictions are not on the basis of the analysis of the trend in which the stock price is changing but more than that it would be based on the instincts and thoughts we put to predict the price of the stock.