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 BANK’S 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 bank’s 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 IPO’s

•      IPO valuation techniques

•      How to choose the peer group

•      How to select valuation multiples

•      Estimating earnings growth

•      The pricing of IPO’s 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