Valuation of any company can be carried out by three main methods:
- profitable
- costly
- market (comparative)
If the second approach is most needed for companies that do not generate regular profits.
The income approach is used by the investor to estimate the potential cash flows that should follow the investment.
Market methods are also closely related to a relatively new management concept - "value-added management. At the same time, the main indicator of the success of management is not the income received, but the growing market value of the company.
High share value on the stock market - facilitating access to capital, which makes the growth of the total shareholder value of P particularly important.
In order to apply it, it is necessary to first determine the system of value measurement, which is necessary to draw up development plans and define management objectives within the framework of the objectives of increasing shareholder value.
The types of specialization of a bank's activities depend on how it generates income.
- In banks serving the retail sector, about half of the profit is net interest income - the difference between interest income from lending and the amount of interest on deposits of individuals.
- Profit from commissions is significant for investment banks or banks specializing in more or more significant part on commission products. In these products, commission income can also be up to 50% of the revenue.
- Very volatile income from commercial activities consists of income from exchange and non exchange financial instruments: securities, currency, etc.
- Other income is formed from non-core activities, investments in production, sales of insurance and pension programs, associated or not associated with the main products of the bank.
Banks, unlike production, are under constant monitoring by the Central Bank, following the work of a large number of federal laws, regulations and instructions.
The structure of the balance sheet is specific for banks, the accounting of the bank is very prompt and today, all is carried out with the help of automated computer systems.
It should be noted that it is obvious that the bank's liabilities are formed in a significant way by borrowed funds, while the equity capital is not so significant.
Analyzing the balance sheet of the bank it is necessary to take into account the problem of assets, which are not necessarily redeemed, because they can be sold in the market ahead of schedule. The problem can be solved by using the principle of market value revaluation. The mentioned feature is also the reason of impossibility of comparison of standard coefficients of banks and production companies among themselves.
For example, ROE in production is a measure of return on capital invested in a company. For banks, when the assets are correctly revalued at the market value of ROE - the cost of equity capital.
Banks and non-financial companies earn by means of assets.
Thus, the correct model of bank estimation should take into account all financial operations, including those with liabilities.
Everything said about the balance sheet is also true for the profit and loss statement.
The basis of the bank's value, in contrast to non-financial organizations, is the interest income received, other significant components of the value are different commissions and income from the sale of securities.
The next difference between banks is the presence of a large number of intangible assets.
From the bank's own non-financial assets, which do not belong to other types of enterprises, it is possible to name participation in the system of deposit insurance, which increases the confidence in the banks and security for the depositor's money, makes deposits more attractive in the eyes of the population.
The value of intangible assets leads to the need to assess them with subsequent capitalization, with the reflection on the balance sheet and the profit and loss statement.
The last peculiarity of commercial banks' activities that I would like to note is the problem of maintaining liquidity. Money plays a different role for the bank than for the production enterprise, for which it is a part of the production process. For the bank it is the most important element of business, management of financial flows for it is a much more complicated thing.
Possible liquidity problems mean a decrease in income. On this basis, credit institutions have to make up their portfolios of elements with different liquidity and profitability values.
Assessment of the bank's value is, first, taking into account the specifics of its activity sphere: taking into account the peculiarities of accounting; availability of strict mandatory standards of the Bank of Russia, reservation norms and requirements to the capital level. It is also necessary to take into account the presence of a large number of intangible assets, both common for business and specific to the industry.