Bank Valuation

At the end of the training, through a mix of lectures, case studies and financial modelling of a large bank, participants will be able to take the historical of any bank, develop projections and obtain its value based on the main methods used, namely Dividend Discount Model and Trading multiples.

Certificate of completion

Digital certificate - Included

COURSE CONTENT

Session 1

Financial Statement Analysis for Banks

• Banks’ financial statements overview
• Accounting for loans
• Expected realizable value

– Credit Issues and collateral
– Non-performing loans
– Understanding impairments vs. write-offs

• Accounting for financial instruments

– Amortised costs, FVTPL and FVTOCI
– Fair value and amortized cost accounting
– Level 1, 2 and 3 valuations
– Impairments of financial instruments: 12-month and lifetime

• Accounting for derivatives

– Hedge accounting: fair value, cash flow and net investment
– Netting derivative assets and liabilities

Session 2

Fundamentals of Regulatory Capital

• Overview of regulatory framework
• Overview of Basel I, II and III
• CRD IV, TLAC and MREL
• Overview of calculating available and required capital

– Common Equity Tier 1 (CET1), Tier 1, Tier 2 and Total capital
– Key reconciliation items from IFRS Book Equity to CET1: minority interests, deferred tax, changes to investment portfolio, etc.

• Overview of calculating risk weighted assets (RWAs)

– Credit risk RWAs
– Counterparty risk RWAs
– Market risk RWAs
– Operating risk RWAs

• Overview of calculating regulatory liquidity and funding ratios

– Liquidity risk

• Key capital ratios

– Tier 1 and total capital ratios
– Leverage ratios
– Liquidity coverage ratios (LCR)
– Net stable funding ratios (NSFR)

Session 3

Forecasting and Modelling for Banks

• Modelling banking activities

– Modelling and forecasting the balance sheet: deposit or loan-driven bank?
– The loan book
– The trading book
– Funding requirements and mix: deposit vs. wholesale funding
– Growth in funds under management
– Modelling and forecasting the income statement
– Understanding the income statement drivers
– Net interest income and margin
– Non-interest income
– Forecasting loan impairment through the credit cycle
– Operating costs
– Tax
– Modelling and forecasting regulatory capital
– Risk weighted assets
– Required capital under Basel I, II or III
– Available capital under Basel I, II or III
– Liquidity requirements and stable funding requirements
– Forecasting dividends using a payout ratio and / or minimum capital requirements

• Ratio analysis

– Key performance ratios

Session 4

Bank Valuation

• Free cash flow to equity model

– Present value of future dividends
– Cost of equity for banks
– Terminal value: review of potential approaches (normalizing key parameters or long-term RoE), limits and benefits
– Sensitivity analysis

• Banking trading multiples

– P/BV and adjustment to BV explained
– P/E, dividend yield

THE TRAINER

Joanna has 10 years of experience in the Financial Institutions Group (FIG) of Deutsche Bank in New York.

Joanna began her career in Investment Banking at Deutsche Bank in New York where she worked in M&A. As an associate, she moved to FIG where she was involved in large public bank takeovers. She completed more than 50 transactions for a combined value of around US$100 billion.

More recently Joanna decided to focus her career on training and teaching. She is a visiting professor at the Wharton MBA programme and trains in the US and Europe on bank-related issues.

She has a Bachelor of Science from the University of Pennsylvania and an MBA in Finance from Wharton. She also holds « Series 7 » and « Series 63 » US licenses.

• Junior FIG professionals in investment banks
• Lateral hires FIG professionals
• Equity Research specialised on banks
• Junior investment managers covering banks
• All other interested Finance professionals