Banks: Regulation and Valuation

Course details

Regulation and Valuation

Regulatory capital is a bank specific topic that is at the core of understanding banks’ business model and valuation. Delegates learn how to quantify regulatory capital available and risk weighted assets. The course concludes with a review of the key valuation methods for banks and delegates complete a dividend discount model of the case bank.

Learning outcomes

• Overview of the regulatory framework
• Calculation of regulatory capital available: core tier 1, tier 1, and total capital and role of hybrid securities
• Calculation of risk weighted assets: credit risk, market risk and operational risk
• Minimum capital ratios and target capital ratios to maintain/achieve a target credit rating
• Additional risk measures: leverage ratios based on common tangible equity
• Extracting historical and forecasting future capital ratios for case bank
• Calculating capital surplus/shortfall for case bank
• Review of bank valuation methods: trading multiples vs. fundamental valuation
• Bank trading multiples: P/E, P/BV, P/tangible BV and dividend yield
• The dividend discount model
• Cost of equity for banks
• Forecasting potential dividends over explicit forecast period for case bank
• Approaches to estimation of terminal value
  • Straight perpetuity formula and sensitivity to long term growth rates
  • P/BV and sensitivity to long term growth rates
• Impact of the Basel III on banks valuation

“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?