Bank Modeling and Valuation

Course details

This is a brand new course being offered for the first time in the Asia-Pacific region.

Modeling fundamentals for banks

Participants build their bank modeling skills through the use of a simple bank model.  This model contains the key components common to all bank projection models.  Participants complete a forecast model of a bank before stress testing their assumptions. Finally, the model is documented and checked.

Key topics:

• Modeling steps for banks
• Balance sheet
• Income statement
• Risk-weighted assets
• Regulatory capital requirements
• Capital surplus or shortfall
• Ratio analysis
• Producing a simple bank model
• Key performance ratios
• Model documentation and integrity checking

Forecasting and modeling for banks

Participants will learn how to model and integrate the balance sheet, income statement and regulatory requirements of a real bank using Excel. In addition to learning the steps necessary to build a bank financial model, participants will also cover how to build models accurately and efficiently through a series of best practice modeling rules. Participants also learn how to stress-test the assumptions used, to check their work efficiently and to document it.

Key topics:

• Modeling commercial banking activities
  • Forecasting the balance sheet
  • The loan book
  • The trading book
  • Funding requirements and mix: deposit vs. wholesale funding
  • Growth in funds under management
  • 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
  • Forecasting regulatory capital
  • Risk-weighted assets
  • Required capital under Basel III
  • Available capital under Basel III
  • Liquidity requirements and stable funding requirements
  • Forecasting dividends using a payout ratio and / or minimum capital requirements
• Ratio analysis
  • Key performance ratios

Bank valuation

Three valuation methods are examined and modeled in this session, namely: Free cash flow to equity, comparable companies analysis and sum or the parts valuation. The advantages and disadvantages of each method are considered.

Key topics:

• Understanding the differences between corporate valuation and bank valuation
• Free cash flow to equity model
  • Present value of future dividends
  • Cost of equity for banks
  • Terminal value: a review of potential approaches, limits and benefits
  • Intrinsic multiples based on RoE, growth and reinvestment rates
  • Sensitivity analysis
• Banking trading multiples
  • P/BV, P/E, dividend yield
• Sum-of-the-parts valuation
  • Key drivers by business
    • Retail banking
    • Corporate banking
    • Asset management
    • Investment banking
  • Valuation considerations and trading multiples for sub-sectors

“It’s great to have access to the AMT online platform. I found the videos and quizzes really useful to refer back to after my public course. The videos in particular were simple and easy to understand.” ~ analyst, private equity firm

Who should attend the course?