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Valuing a Financial Institution

Learn the different techniques that can be deployed in assessing financial institutions

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

A one-day course

Part One

Introduction to financial institution valuation

  • Valuation techniques – price versus value
  • Pricing techniques – market focus
  • Risk and the pricing of risk
  • Differences between the 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 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 cashflow value of loan portfolio
  • Discounted cashflow 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 a financial institution 

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 valuing an FI using 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 amortization) & EBIT (Earnings before interest and taxes)
  • Banking valuation portfolio and customer coverage
  • 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
  • Sum of the parts company valuation techniques for FI groups
  • Differences between bank valuation, fund management, leasing companies and asset management company valuation  

Summary of key issues and concluding comments

Our financial institution valuation course trainer is the Managing Director of an international advisory company specialising in advisory and development services to the corporate, banking and finance industry, which he has owned for the past 17 years. 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 has previously 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 trainer’s main areas of expertise are corporate finance valuation methods, M&A, corporate analysis and structured finance, asset securitization, risk management, valuation, corporate credit processes, project finance and treasury management. He currently works with many global corporate and banking clients in these areas and he also acts as Expert Witness for London law firms in respect of his areas of expertise.

The list of global clients is extensive and covers both European, Middle East, African and Asian markets. In the corporate market, he works extensively 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 directly to the senior line management.

He is also a well-known figure within the various training and development companies within Europe and regularly gives seminars throughout the world on his specialist topic areas and is a recognized expert in this area by many organisations.

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

The list of financial institutions and corporates with whom he has worked over recent years is extensive and includes Allied Irish Bank, Alpha Bank, Bank of America Merrill Lynch, Bank of China, Barclays, Bayern LB, BT plc, Citibank, China Construction Bank, Credit Agricole, Credit Suisse, Danone, DECC, Deloitte, Dexia, Emirates Bank, E&Y, Euler Hermes, First Gulf Bank, FSA London, Garanti Bank, HBOS, Hohhot Bank Mongolia, HSBC, HVB, Iccrea Banca, Intesa SanPaolo, Central Bank of Ireland, KPMG, L’Oreal, Malta FSA, Mongolian Stock Exchange, Morgan Stanley, Mubadala, NHS and many others.

Our training is designed to cover the areas of the valuation of banks and financial institutions. The programme will include short lecture sessions and case study examples.  Delegates will use Excel-based models for the valuation exercises.

This will enable delegates to fully understand the implications of decision-making in terms of bank performance analysis, together with giving them a better appreciation of bank performance ratios and analysis that impact valuation.

  • Interactive online financial institution valuation training using Zoom
  • Specific focus on the valuation of financial institutions
  • Coverage of several different valuation methodologies
  • Copious use of case study examples
  • Practical valuation exercises
  • Opportunity to discuss valuation issues with an experienced practitioner

Our financial institution valuation training will utilise the Zoom online platform which is well suited to this task. The programme will be divided into short sessions to maintain attention span during the training. We will make use of both Slido (a polling app) and Mural (a virtual whiteboard app) applications during the training to encourage interaction and discussion which is important when using online training methodologies.

All of the financial institution valuation course material will be provided before the session for delegates to download as they will be 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. The essence of the training methodology is to ensure both a practical and rigorous delivery of the programme material.

  • Good instructor. Well formulating and good at organizing, Many practical examples.

Have this course presented In-House

  • On a date, time and in a location of your choice
  • Topics expanded or deleted to your bespoke requirements

Have this course pre-recorded

  • Full course recording edited exclusively for your company
  • Files converted to enable housing on your LMS
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