 Just like what Warren Buffett said, it's actually a lot more difficult to understand a company from the financial sector. Financial companies are more difficult to analyze than many companies. With the collapse of Silicon Valley Bank, Sinicham Bank, and Silvergate Bank, and now so many other banks in trouble. Many investors are left to question, is banks still safe to invest in? But we all know Warren Buffett said, be fearful when others are greedy and be greedy when others are fearful. So with the extreme fear in the financial market right now, there must be some opportunities for us to seize. That's why in this video, I Chloe, the alligator investor, will share with you how to invest in banks and analyze which banks are safe to invest in, so that we all learn to reach some handsome rewards in this crisis. But before that, if it's the first time of you coming to my channel, remember to hit the subscribe button as well as the notification bell so that you will not miss out any of my future investment updates. An early thumbs up is also appreciated because I will tell YouTube algorithm that you find this video helpful, so that more people will get to see this video to learn how to invest safely. In return, I will share with you how to invest in banks in this volatile crisis. Before you invest in banks, there are several metrics for you to consider to assess the bank's financial health as well as future growth potential. That's why in this video, I will use Bank of America as well as the recent fell SVV bank as an example, so that you learn how to look into them and analyze for yourself. So here are the top 5 investing metrics to consider before buying your first bank stock. 1. Non-performing Loan to Total Loan Ratio In order for banks to make money, they need to loan out their money to earn an interest. However, if the borrowers are unable to pay back, it will eventually snowball into a huge problem just like what we saw back in the old 8 financial crisis. That's why the first metric to check is the Non-performing Loan to Total Loan Ratio. This metric measures the percentage of the loan not being paid back on time, and a high MPL ratio represents that this bank has a higher default risk, and therefore is more financially unstable. That is why we want this ratio to be as low as possible with a maximum of 2% to be safe. By looking at SVV's MPL ratio, it was a very healthy 0.18% in the most recent annual report. And for BAC, it was 1.22% for year 2022, which is also within the reasonable range. So based on this metric, SVV shouldn't have failed. Exactly, that's why we need to dig deeper to look into investing metrics number 2. Net charge-off rate percentage If there's still a chance for the bank to collect back its Non-performing Loan, there will be no chance at all when it comes to net charge-off. Also known as bad debt, net charge-off are loans that deem to be irrecoverable, and that's why the banks return it off as an expense. If you look at BAC, it has a net charge-off rate of 0.21%. In fact, inside my private telegram, I share with my followers that BAC has been enjoying a low net charge-off rate since the await crisis, be it in commercial, consumer, or credit card segment. So that means since the await crisis, the bank has been becoming really cautious in terms of lending. If you haven't joined my telegram yet, make sure to join by the link below to get the latest update, and it's free. Now let's take a look at the net charge-off rate of SVB. Oh my god, it's even lower than BAC at 0.1%. So why did it collapse? So it shows that just by looking at these two metrics, it is not enough. That's why we need to look at the next one, which is investing criteria number 3, growth in deposits. In order for banks to loan out money to an interest income, they need money in the first place as a form of deposit. That's why if the bank has a consistent growth in deposit, this is a good sign. On the other hand, if the bank has been consistently having less and less deposit, this could be a dangerous sign. So let's take a look at SVB. As you can see, SVB has enjoyed a 25% growth in deposit as compared to 2021. What for BAC deposit decreased by 6.5% as compared to the year earlier? You must be wondering, if that's the case, SVB looks like a better bet to invest in, isn't it? Before jumping to the conclusion, let's take a look at the next metrics, which really marks a huge difference between BAC and SVB, which is size of the deposit. Although SVB enjoys a 25% growth in deposit, its size is only $185 billion, as compared to BAC's $1.9 trillion. The sheer size of the deposit just makes BAC a much safer bank to invest in, because most of the deposit sources come from normal people living in the US. Think about it, how likely would it be for Americans to want to withdraw cash from the bank and put it as cash inside their house? The thought of it sounds even more scary, isn't it? That's like inviting robbers to come to your house. That's why it's very unlikely for BAC to suffer bank run, especially with the government's assistance to ensure the stability of the financial sector. So people in the US will definitely have more confidence in big banks like BAC, JP Morgan, rather than small regional banks like SVB. On the other hand, for SVBs, most of the deposits come from tech startups, venture capital firms and private equity, which are a lot less stable in nature. So when all these companies start to smell trouble, they quickly withdraw funds from SVB, and thus causing the liquidity crunch which eventually causing the bank to collapse. Of course, analyzing banks takes more than just looking at these four metrics. Investors should also look at other criteria like return on asset, loan portfolio, net interest margin, and so many more. Just like what Warren Buffer said, it's actually a lot more difficult to understand a company from the financial sector. Financial companies are more difficult to analyze than many companies. If you're analyzing something like WD-40 or C's candy or our brick business, whatever, they may have good or bad prospects, but you're not likely to be fooling yourself much about what's going on currently. But with financial institutions, it's much tougher. So if you don't understand individual banks well enough, here comes the two number five to help you to invest in the financial sector safely, which is to ETF. By buying an ETF like XLF, you immediately build a portfolio with all these strong companies inside, including Warren Buffer's Berkshire Hathaway, JP Morgan, Bank of America, Amex, and more. And for the past 10 years, the ETF has generated investors close to 10% return. Pretty amazing, isn't it? The current stock price is $31, but if you know how to use BOSS option strategy, you can buy XLF even cheaper than the current market price. For example, true BOSS option strategy, by promising to buy XLF at $30, you get to collect about $67 in terms of passive income in 30 days. That's a 2.2% return in one single month. Of course, there are different option strategies for you to take advantage of in different market conditions. If you want to learn how to get started, your stock and options investing journey so that you can collect passive income consistently even in this volatile market, do join us in our upcoming 3-2-hour next-level options masterclass where we'll share with you 3 different option strategies for you to get started step by step. All you have to do is click on the link below and register for your free spot. Of course, the collapse of SVB also has to do with other factors such as the company buying a lot of long-term treasury bonds thus causing the liquidity issue. It just shows that blood swan event can happen anytime, and we should never take our investment portfolio for granted. That's why it's so important that we invest in something that we truly understand, and when it comes to investing, it's very important to manage our risk. And that's why regardless how confident you are in one single company, it's always important to build a portfolio so that in case this company doesn't do well, your portfolio is still intact. And if you're not sure about one particular company, it's always good to invest with ETF so that you can immediately build a portfolio for yourself. So what's your greatest takeaway from this financial crisis? Comment down below and let me know your thoughts. In the meantime, don't forget to join my Telegram channel so that you can get more investment updates. Also check out some of the videos right here to continue your investment journey. With that, I will see you in the next video. Arigato!