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How to Value a Bank: From Licensing to Resolution
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This book gives an overview of the most common techniques used by analysts and experts to assess and value banks in all phases of a Bank's life, from licensing to resolution. These include licensing procedures, going concern market valuation techniques, liquidation, and resolution methodologies. The author sheds light on financial institutions' reporting and financial statements and explains how to interpret the data. Special attention is given to the different valuation approaches for financial institutions ranging from the basic PE and PBV methodologies to the more sophisticated ones such Discount cash flow (DCF), Dividend discount model (DDM), excess return models (EVA), and their variant, the warranted equity value (WEV) method. The authors also illustrate how to build a sum-of-the-parts model (SOTP) and how to treat capital in the process as well as developing a bottom-up approach for the cost of equity. The book provides numerous real-world examples which will hopefully help practitioners build their own MS Excel models. Furthermore, this publication investigates some of the critical aspects of banking M&A and its valuation implications.
This book also takes a deep dive into valuation for Banks in gone concern status, describing the basis for three different types of valuation of Banks in resolution: to inform a decision on whether to put a bank into resolution; to inform the choice of resolution tools and the extent of any bail-in of liabilities; and to determine whether any creditors would have been better off had the bank gone into insolvency. Special attention is given to the valuation of non-performing loans (NPLs) and financial assets focusing on some operational aspects of winding-down a bank's loan and trading book portfolio.
Alessandro Santoni worked at the International Monetary Fund (IMF) in the Financial Crisis Division and European Central Bank (ECB) manager responsible for Onsite Inspections and beforehand manager for Financial Crisis Management Interventions. Beforehand, he worked in the Banking industry at Goldman Sachs, BMPS and ABN. He has a PhD from University of Siena, a Master in International Economics & Management from SDA Bocconi and an EMBA from Columbia University, LBS and Hong Kong University. He has three degrees in Economics, History and Political Science from the University of Siena. He teaches Risk Management, Financial Crimes at Bayes University of London, Frankfurt School of Management and University of St. Gallen. Certified Financial Crime Specialist (CFCS) and AML Specialists (CAMS). He is a co-author of the book ''Corporate Governance in the Banking Sector''.
Federico Salerno worked as a banking supervisor and beforehand for Financial CrisisManagement Interventions in the ECB's Single Supervisory mechanism (SSM) in Frankfurt. He previously worked as equity research analyst, covering financial Institutions ranging from small to large caps at both bulge brackets and boutiques, mainly out of Milan, London, and Paris. He held a Master in International Economics & Management from SDA Bocconi in Milan and degrees in Law and Political Science from the University of Siena. He was a CFA charter holder, CFA Institute.
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