Bank Valuation and Methods

Conventional valuation techniques are not used to assess financial organizations since their cash flows are more difficult to ascertain than those of other firms. The difficulty in estimating cash flow can be attributed to two circumstances. First, it is difficult to define the terms "working capital" and "debt" in these businesses. Second, banks are claimed to invest in intangibles like human capital and brands, and these costs may be immediately deducted. So, in terms of valuation, multiplier analysis, Tobin's Q, and warranted equity approaches are favored.

The purpose of this course is to describe the valuation techniques utilized and the reasons why bank valuation differs from other types of valuation. Investors will be given comprehensive information on the procedures used by financial institutions, particularly banks, to value their holdings, and these methods will be reviewed by providing relevant technical data. Investors will gain from the interpretation of the valuation results after the course as they use the knowledge they have gained to make investment decisions.