By Mario Massari,Gianfranco Gianfrate,Laura Zanetti
This publication provides the most valuation methods that may be used to worth monetary associations. via sketching 1) different company types of banks (both advertisement and funding banks) and insurance firms (life, estate and casualty and reinsurance); 2) the constitution and peculiarities of monetary associations’ reporting and fiscal statements; and three) the most beneficial properties of regulatory capital frameworks for banking and coverage (ie Basel III, Solvency II), the publication addresses why such parts make the valuation of economic associations assorted from the valuation of non-financial companies.
The booklet then beneficial properties the valuation types that may be used to figure out the price of banks and insurance firms together with the Discounted money circulate, Dividend version, and Residual source of revenue version (with the right estimation innovations for the price of capital and money circulation in monetary industries). the most ideas to accomplish the relative valuation of monetary associations are then offered: alongside the normal multiples (P/E, P/BV, P/TBV, P/NAV), the multiples in keeping with industry-specific worth drivers are mentioned (for instance, P/Pre Provision revenue, P/Deposits, P/Premiums, P/Number of branches). additional valuation instruments similar to the “Value Maps” or the “Warranted fairness approach” could be defined and mentioned. The last portion of the booklet will in brief specialise in the valuation of particular monetary companies/vehicles equivalent to closed-end cash, deepest fairness cash, leasing businesses, etc.