Course dates
A comprehensive 4–day course for banking experts that will help you to:
- Understand the principles of value creation in wholesale, retail banking and asset management.
- Apply the dividend discount model, the equity cash flow calculation and the economic benefit concept to value banks.
- Use market multiples and external data to assess bank values.
- Differentiate between quantitative and qualitative factors affecting the value of banks.
- Apply correctly valuations derived from the stock market, IPOs and M&A transaction.
- Identify and value synergies in acquisitions.
- Conduct successfully a due diligence process.
- Understand why some bank acquisitions succeed and so many fail.
Who should attend?
- Executives and General managers.
- Investment and corporate bankers.
- Experts in investment banking and corporate finance.
- Analysts in banks, investment funds or private equity houses.
- Portfolio managers and investment analysts.
- Managers in M&A departments.
- Experts responsible for corporate strategy and planning.
- Banking and strategy consultants.
Course Background
The global financial crisis, the collapse of major financial institutions and an unprecedented volatility in the credit and financial markets have influenced the value of banks in recent months. The value of many banks has dropped significantly below their book value. The industry faces new regulatory requirements, significant capital needs and challenging customer demands which are threatening the traditional business models. Historically achieved growth and profitability targets seem impossible to achieve in the future.
Today, for executives and managers of financial institutions it is more important than ever to understand how the valuation of their institution is influencing the strategic decisions of management, shareholders, investors and competitors.
This programme helps you to identify the different value drivers in wholesale and retail banking and corporate finance. The different business segments of your banking business will be evaluated and your institution will be seen with the eye of shareholders, investors, capital markets and private equity funds. Emphasis is given to all aspects of external valuation driven by performance ratios, financial ratios from capital markets- and transaction comparables. In addition, the course explains in detail how to value a bank from the inside by using the dividend discount model, equity cash flow valuation methodology and the economic value concept.
Delegates will conduct a due diligence process, identify and value synergies and calculate the value contribution of the different business segments of a financial institution. Finally, the delegates will plan and execute a bank acquisition and understand the importance of the integration process.
Day 1
Understanding the bank’s strategic position
Understanding bank strategies
- The Banking industry after the financial crisis.
- An updated outlook of the word economy.
- New regulatory requirements.
- Recent developments in mature and emerging markets.
- Assessing the strategic position of a financial institution.
- Understanding the value drivers in.
- Corporate banking.
- Retail banking.
- Investment Banking.
Workshop: SWOT analysis of an emerging market bank.
Analysing the financial statement of banks
- Definitions.
- Analysing the asset side under IFRS and US- GAAP.
- Treatment of securities.
- Mapping provisions and loan losses.
- Calculating fair value.
- Analysing the liability side under IFRS and US–GAAP.
- Fair value of long–term liabilities.
- Analysing shareholder’s equity.
- Regulatory equity.
- BIS–ratios.
- Treatment of goodwill.
- Treatment of excess capital and equity shortfalls.
- Derivatives accounting.
- Analysing the income statement.
- Analysing interest, fee and trading income.
- The spread model.
- Gap analysis.
- Mapping provisions and write–offs.
- Assessing key expense items.
- Defining performance ratios.
Workshop: Analysing key components of a bank’s financial statement.
Day 2
The value of banks
Equity cash flow valuation
- Difference between equity and enterprise valuation.
- Introduction to the DCF methodology.
- Understanding the equity cash flow methodology.
- The direct method.
- The indirect method.
- Calculating equity cash flow from the financial statements.
- Understanding the key value drivers.
- Cost of equity, ROE and growth assumptions.
- Forecast horizon.
- Terminal value.
- Decomposition of ROE.
Case study: Calculating the equity cash flow of Silver Bank.
Components of the equity cash flow valuation
- Introduction to the Capital Asset Pricing Model (CAPM).
- Calculating the cost of equity.
- Determining the market risk premium.
- Understanding beta (ß).
- The cost of equity of private banks.
Workshop: Delegates will calculate the cost of capital of public and private enterprises and discuss the implications of their assumptions.
The dividend discount model
- The importance of the dividend discount model.
- Advantages of the dividend discount model.
- The Gordon Growth Model.
- Understanding financial ratios.
- P/E, P/B, ROE and COE.
- Importance of a bank’s gearing.
- The sustainable growth factor.
- Identifying over–and under valuations of traded banking stocks.
- Understanding performance ratios.
Case study: Determining the share price of a stock listed bank with the dividend discount model.
The residual income approach
- Introduction to the concept.
- Advantages of the residual income approach.
- The methodology.
- The calculation and interpretation of the result.
Day 3
Valuing banks from the outside
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Valuation by multiples.
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Understanding best practice.
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Assessing the right peer group.
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Analysing the ratios.
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P/E.
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P/B.
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Dividend yield.
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Applying stock market multiples correctly.
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Ratios from comparable transactions.
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Using performance ratios.
The acquisition of a financial institution
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Charting the bank market.
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Identifying attractive markets.
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Understanding market premiums.
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Defining market entry strategies.
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Forms of acquisitions and payment.
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Organic growth vs acquisitions.
Workshop: Selecting performance ratios and their application for different banking segments and the interpretation of the results.
Understanding synergies
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Understanding success factors in mergers & acquisitions.
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Avoiding the most common mistakes.
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Identifying synergies.
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Cost synergies.
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Revenue synergies.
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New growth opportunities.
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Valuing synergies in domestic and international acquisitions.
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Getting synergies after the merger.
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The domestic branch network.
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The international branch network.
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Overlapping activities.
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Calculating restructuring charges.
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IT implementation.
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Economies of scale and scope.
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Other synergies.
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Time table for implementation.
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Personal decision.
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Business decision.
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Divestitures.
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Investments.
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First results.
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Why do some acquisition work and so many fail?
Case study: Delegates will identify, analyse and value different types of synergies and discuss the validation of their findings.
Day 4
Executing a capital market transaction
Executing a bank acquisition
Case study: Delegates will calculate the value creation or destruction in an all stock purchase.
Post merger integration
Workshop: Best and worst practice in recent acquisitions in the banking industry.
Valuing banks for an IPO
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Understanding recent trends in equity markets.
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The market for bank IPOs.
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Rationale for an IPO.
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The “beauty contest”: form and contents.
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Different forms of underwriting.
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IPO valuation techniques.
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How to choose the peer group.
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How to select valuation multiples.
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Estimating earnings growth.
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The pricing of IPO’s in a book-building process.
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Post IPO performance.
Course summary and close
Johannesburg Hotel, Johannesburg, South Africa
This programme takes place on a non-residential basis at a central Johannesburg hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Ralf. H. Fiedler
Former member of the Executive Board, ING Europe, BHF - Bank and Bayerische Vereinsbank in New York
Ralf. H. Fiedler is an executive with over 25 years experience in banking and consultancy; he is a former member of the executive boards of ING Europe, BHF- BANK and Bayerische Vereinsbank in New York. Ralf was responsible for managing large banking networks, corporate finance and investment banking activities geared towards small and medium sized companies.
In addition, he was frequently involved in restructuring projects to increase the efficiency and profitability of bank organisations, credit processes and risk management functions. Based on his assignments, he has substantial experience in developed and emerging markets.
Prior to joining the banking industry, Ralf worked for almost 10 years for BASF, the world largest chemical company. In this capacity, he was involved in the external funding programme of the company, strategic planning and the analysis and execution of numerous acquisition projects all over the world.
Today, Ralf is specialising in working with leading banks and financial institutions to design their strategies, to enhance profitability by seeking growth opportunities and product innovation, to address risk adjusted pricing and to streamline credit policies and procedures. In addition, he teaches Bachelor and Master courses in Banking and Finance at different universities.
Courses run by this instructor
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Course dates