Bank shares or stock are the shares of a banking institution. Banks emit different types of stock: ordinary shares, registered, non-voting, preferred etc. Ordinary shares represent stocks that have no predetermined dividend amounts. They are equity ownership in a banking institution, entitling owners to vote in proportion to their ownership percentage. The holders of ordinary shares receive dividends but only if such are available after the entity has paid out dividends on preferred shares. These are also known under the term common stock. Registered shares represent stock that can be registered on the names of their exact holders. In case the owner of the shares decides to sell them, they have to be registered on the name of the new owner. Non-voting shares entitle shareholders to percentage of the profit but provide little or no vote on important matters (e.g. mergers). It is important to note that not all entities offer non-voting and voting stock, and not all shares come with equal voting power. These shares are typically issued for persons who want to invest but at the expense of the accompanying voting rights.
Preferred Shares
Preferred shares are a special type of equity that exhibits the properties of debt instruments as well as equity. These stocks take priority over common shares when it comes to the payment of dividends but carry no voting rights. Given that preferred shares represent ownership in a bank institution, falling stocks may trigger a reduction in the price of preferred shares. However, depressed bank stocks suggest that investors should buy preferred shares due to the potential for capital appreciation. It is important to note that in liquidation, bonds have priority over preferred shares. If the issuing institution goes under, investors holding bonds have better chances of collecting on their claim. Some persons are tempted to invest in preferred shares with a high current yield, but the bank might be about the cut the dividend. Alternatively, the stock may be called. For these reasons, it might be better to invest through a fund specializing in them as a substantial percentage of its portfolio will be comprised of preferred shares.
Service Providers
In general, industry professionals often turn to bank stocks as they are typically traded slightly above book value. For this reason, stocks listed on the exchanges are less volatile than the market, offering a good appreciation potential. Buying bank stocks is quite similar to trading other stock. Investors just need to open an account with a stock brokerage company or an investment firm, do some research, and have money to invest. After opening an account, the investor has to deposit a specified amount of money. The next step involves researching the bank whose stock one is about to purchase. Full-service brokerage companies offer detailed information on all financial service providers listed on the major exchanges. Online and discount brokerages may not provide this service, requiring that the investor conducts research on his or her own. In this case, it is best to look at the investor relations page of the chosen bank which will provide useful information and help make an informed decision. As a next step, the investor should determine the total number of bank shares to be purchased, together with the price he or she is willing to bid. This is the moment to contact the brokerage firm and request them to enter a buy order. You may also ask them to complete the trade at the price at which the stock is currently sold; alternatively, you might specify a lower price. The transaction will be carried out if someone trades stocks at this price or the order will be cancelled.
