Course Description
Surging emerging and capital markets, the introduction of new products and a
world- wide consolidation process in the banking industry have driven the value of banks in recent years. On the one side, the industry faces declining margins, fierce international competition and the entrance of new market participants which are threatening traditional business models. 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 asset management. 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 DCF, FCF and forecasting methodologies. You 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, you will plan and execute a bank acquisition and understand the importance of the integration process.
PROGRAMME FEATURES
This programme draws on the knowledge and practical experience of an internationally experienced executive who has worked for some of the largest institutions in the world. In these responsibilities, the course director has executed and advised on numerous bank acquisitions, divestitures and IPOs. The course applies to executives and general managers in developed and emerging markets being responsible for the strategy and value creation of their financial institution. In addition, analysts, corporate finance
and capital markets experts are introduced to the latest developments in valuing financial institutions and they will learn what factors are driving the value of banks. The training will use teaching methods based
around lectures, case studies, practical exercises and
class room discussions. The course will use
real life case studies and examples to develop your understanding of all aspects of wholesale-retail-banking and asset management valuation. You will learn to apply various methodologies of valuing banks, understand their different results and their successful application to
real life situations.
Course Objective
A comprehensive 5-day course for banking experts that will help you to:
·
Understand the principles of value creation in wholesale-retail banking and asset management
·
Use different valuation methods to value a financial institution
·
Compare enterprise valuation with equity valuation
·
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
Managers in M&A departments
Experts responsible for corporate strategy and planning
Banking and strategy consultants
Human resources and training
Course Outline
Day One
UNDERSTANDING THE BANKS STRATEGIC POSITION
Welcome and introduction
Programme overview
Delegates expectations
Session 1: Recent strategic developments in the banking industry
Recent developments in mature markets
Recent developments in emerging markets
Facing international competition
Creating competitive advantages in emerging
markets
Understanding the value drivers in
Corporate banking
Retail banking
Asset management
Workshop: SWOT analysis of an emerging market bank
Session 2: Rationale for valuations
Strategic considerations of
Management
Shareholder
Competition
Private Equity and Hedge Funds
Others
Acquisition versus organic growth
The stock market (IPO) valuation
Rationale for acquisitions
Seeking growth
Domestic consolidation
International expansion
Valuation in take- over/ merger situations
Types of transactions
Workshop: Understanding the rationale behind recent banking acquisitions/transactions
Session 3: Introduction to enterprise valuation
Defining earnings and cash flow
Estimating the banks earnings and cash flow
Understanding the DCF- methodology
Growth estimations
Terminal value
Residual value
The CAPM model
Calculating the cost of equity
Calculating the cost of debt
Applying WACC
Determining the right discount factor
Workshop: You will calculate the cost of capital of public and private enterprises and discuss the implications of their assumptions
Session 4: Introduction to equity valuation
Why are bank valuations different?
What to discount: earnings or dividend?
Defining earnings
Calculating the cost of bank equity
Calculating the cost of bank debt
Determining the right discount factor
Case study: You will calculate the cost of equity for different banks and determine the right discount factor.
Day Two
THE VALUE OF BANKS
Session 5: Valuing banks from the outside
Introduction
Selecting a peer group
Determining the right multiples
Performance ratios to estimate the value of different banking sectors
Corporate banking
Investment banking
Retail banking
Asset management
Workshop: Selecting performance ratios and their application for different banking segments and the interpretation of the results
Enterprise valuation models
EV/EBIT
EV/EBITDA
Equity valuation models
P/E, EPS
Dividend discount model
PEG ratio
P/Book
Using financial multiples
P/sales
P/customer
P/assets under management
Others
Using comparables from M&A- transactions
Session 6: Valuing banks for IPOs
IPO valuation techniques
How to choose the peer group
How to select valuation multiples
Estimating earnings growth
The pricing of IPOs in a book-building process
Post IPO performance
Day Three
VALUING BANKS FROM THE INSIDE
Session 7: Performing an inside valuation
Introduction to the applied methodologies
Identifying the key value drivers in
Corporate banking
Investment banking
Retail banking
Asset management
Analysing future interest rate income
Margin income
Interest rate transformation
Inflation versus volume growth
Analysing future fee income
Corporate banking
Investment banking
Others
Valuing trading income
Capital markets
Proprietary trading
Assessing equity requirements
Actual versus target equity ratio
Identifying surplus capital
Dividend requirements
Understanding provisions
Book value
Market value
Accounting issues
Analysing the funding base
Case study: Based on actual figures, you will articulate assumptions for different business segments of a bank calculate the value contribution of these segments and discuss the result of the valuation with the other participants
Session 8: Understanding synergies
The theory of synergies
Identifying synergies
Major cost position
Future investments
Growth opportunities
Valuing synergies
The implementation of synergies
Why do some acquisitions work and so many
fail?
Case study: You will identify,
analyse and value different types of synergies and discuss the validation of their findings
Day Four
THE DUE DILIGENCE PROCESS AND POST MERGER INTEGRATION
Session 9: The due diligence process
Introduction
The application of performance indicators for the different banking activities
Searching for synergies
Determining investments
Realising divestitures
The management due diligence
Mission and vision statements
1st and 2nd level assessment
The business and strategic due diligence
Regional domain and market share
Client base in:
Wholesale banking
Retail banking
Asset management
Product range and
cross sell potential
Product innovation
Efficiency of the distribution channels
Branch network
Direct and e-banking
Alternative distribution agreements
The financial due diligence
Accounting discrepancies
Off-balance-sheet contributions
The credit-and risk management due diligence
The rating system
Credit decision process
The risk processes and procedures
Portfolio analysis
Provisions and
write
offs
The operating risk due diligence
The documentation/data base of operational losses
Procedures and processes
Understanding risk indicators
Data to be reviewed
The legal due diligence
Long term contracts
Outsourcing
Joint Ventures/distribution agreements
Data to be reviewed
Case study: You will outline the due diligence process for a major acquisition project, and express your expectations and
analyse the findings.
Day Five
Session 10: Post merger integration
Mission and vision
Rationale for the combined entity
Communication
Time table for implementation
Personal decision
Business decision
Divestitures
Investments
First results
Workshop: Best and worst practice in recent
Acquisitions in the banking industry
