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Valuing a Financial Institution

Master the various techniques deployed in assessing financial institutions

View of the London skyline from Tower Bridge with the River Thames in the foreground

One-day training on the valuation of financial institutions

pdf Download:   Course Outline

  • Develop practical expertise in valuing financial institutions using multiple methodologies
  • Strengthen your analysis of financial performance, risk, and revenue drivers to inform valuation and decision-making
  • Enhance your modelling capabilities to support robust, real-world financial institution valuations

Part One

Introduction

  • Valuation techniques – price versus value
  • Pricing techniques – market focus
  • Risk and the pricing of risk
  • Differences between financial institution and corporate valuation techniques
  • Income volatility for banks, insurance companies, asset managers, other FI’s
  • Return on equity and Price/BV
  • The relevance of the cost of capital
  • Limitations of accounting-based data
  • Problems associated with using traditional DCF techniques for valuing FI’s 

Advanced Discounted Cash Flow Techniques for FI‘s

  • Loan portfolio default rates and provisioning policy
  • Concentration and position risks
  • Discounted cash flow value of the loan portfolio
  • Discounted cash flow value of on-balance sheet instruments
  • Market risk of derivative positions and impact on value
  • Choice of Discount Rate
  • Cost of Strategic Equity Capital
  • Problems with the use of betas
  • Impact of risk and uncertainty
  • Practical application of DCF techniques to FI’s
  • Approaches to the market premium – use of implied premium
  • Terminal valuation, perpetuity, and appropriate adjustments
  • Subjecting the valuation to sensitivity
  • Case study example of valuing financial services firms and institutions 

Evaluating the FI Revenue Base: Strategic Risk

  • Diversity of revenue base
  • Margin spread and the effects of yield curve movements
  • Transfer pricing impact
  • Shareholder value-added measurement
  • Strategic value management
  • Case study example of adding value through strategic value management

Part Two

Dividend Valuation

  • Comparison to DCF (Discounted cash flow)
  • Practical problems in application
  • When to adopt it as the principal valuation technique
  • Dividend Yield Valuation Method Basis
  • The Dividend Growth Model Formula
  • Multi-period dividend discount models
  • Dividend Policy and its impact on valuation
  • Case study: Valuation of financial companies using a dividend valuation approach 

Asset-Based Valuations

  • Balance Sheet Approach, NAV (net assets value) and RoNAV (Return on net assets value)
  • Realisable Value and Replacement Cost
  • Applications in Practice
  • Composite Basis of Valuation
  • Case studies using the RoNAV approach

Pricing Techniques - Comparatives

  • Determining appropriate comparative businesses
  • Adjustments to be applied in the application of comparative data
  • Price/book value of equity and link to return on equity
  • Price/cash flow and other cash multiples
  • Total enterprise value
  • P/E (price-to-earnings) ratios and their use – relative P/E ratio, PEG (price/earnings-to-growth)
  • Enterprise value to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) & EBIT (Earnings Before Interest and Taxes)
  • The banking valuation portfolio and customer coverage are explored in this bank valuation course
  • Qualitative assessment of management's ability to deliver results
  • The efficiency of operations and cost/income ratios
  • Market sector growth possibilities
  • Effect of bank reorganisations and asset redeployment on the overall value
  • Case studies using comparatives to value FI’s

 Problematic Issues in Valuation

  • Investment in banking groups with differential risk profiles
  • Embedded value of future income streams
  • Valuing goodwill
  • The sum of its parts: company valuation techniques for FI groups
  • Differences between bank valuation, fund management, leasing companies and asset management company valuation  

Valuation of financial institutions concludes with a summary of key issues and comments.

Redcliffe’s bank valuation course specialist is the Managing Director of an international advisory company. They specialise in advisory and development services to the corporate, banking and finance industry. He has owned it for the past 17 years.

He was previously the Managing Director of a subsidiary of Union Plc, a London merchant bank, having worked with several high-profile global investment banks. He left Union Plc in 1996 to form his own international advisory Company.

He is an experienced corporate finance professional with practical experience and extensive knowledge of corporate and structured finance in global financial markets. He is a Visiting Fellow in the M&A department and Programme Director at Executive Development, Sir John Cass Business School, London, a member of the Visiting Faculty at Fuqua Business School and worked as an advisor to the Overseas Development Administration in the UK, as well as EU PHARE and TACIS programmes throughout Europe and Russia. The list of global clients is extensive and covers European, Middle East, African and Asian markets.

In the corporate market, he works with large corporate clients, private equity firms, and private investors, as well as public sector companies such as the NHS and major law firms. He provides advisory and development services to these organisations, either through the relevant departments or to the senior line management.

He is a well-known figure within the various training and development companies in Europe. He regularly delivers seminars worldwide on his specialist topics and is a recognised expert in this area by many organisations.

He currently works with many global corporate and banking clients in the following areas:
  • Corporate finance valuation methods
  • M&A
  • Corporate analysis and structured finance
  • Asset securitisation
  • Risk management
  • Valuation
  • Corporate credit processes
  • Project finance
  • Treasury management

He acts as an Expert Witness for London law firms on his areas of expertise.

Redcliffe's course comprehensively covers the valuation of financial institutions and banks.

The programme will include short lecture sessions and case study examples.

Delegates will use Excel-based models for valuation exercises. This will enable delegates to understand the implications of decision-making for bank performance analysis, giving them a better appreciation of bank performance ratios and analyses that impact valuation.

Our financial institution valuation training is divided into short sessions to maintain attention span during the training. We will use the Slido (a polling app) and Mural (a virtual whiteboard app) applications during the training to encourage interaction and discussion. Important when using online training methodologies.

Bank valuation course material is provided before the session for delegates to download; they are needed during the sessions.

Delegates will be divided into small groups for practical exercises on valuation fundamentals, and the breakout function in Zoom is particularly useful in this regard, which allows the use of group work in a similar manner to what would be used during a normal face-to-face training session. This ensures both a practical and rigorous delivery of the programme material.

  • Good instructor. Well-formulated and good at organising. Many practical examples.
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