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Palgrave Macmillan

Integrated Bank Analysis and Valuation

A Practical Guide to the ROIC Methodology

ISBN 9781137307453
Publication Date December 2013
Formats Hardcover Ebook (EPUB) Ebook (PDF) 
Publisher Palgrave Macmillan
Series Global Financial Markets

The financial crisis that began in 2007 exposed many flaws in modern financial practice and highlighted much need for change. Key among those needs is a way of understanding how and why banks fail or succeed. Integrated Bank Analysis and Valuation provides readers with a practical guide to the ROIC for Banks methodology - one of the few ways of both understanding what makes a bank tick and getting a fundamentally robust indication as to how much a bank is worth. It provides all the necessary tools for use in the real environment of investment banking to analyse banks results, evaluate strategic options and assess regulatory changes – with an eye towards whether a bank is creating or destroying value. Up-to-date case studies of ten of the world's largest banks show how integrated ROIC analysis and valuation works in practice, and the accompanying website features ROIC spreadsheets for each of these banks, so that each step of analysis and valuation can be explored in detail.

Written by a leading banks analyst, Integrated Bank Analysis and Valuation: A Practical Guide to the ROIC Methodology translates the complexity of banks into a simpler, clearer language – that can be applied by analysts, regulators and students in practice.

Sandy Chen heads the financial services arm at Cenkos Securities, the City of London's leading independent securities firm. Previously, he was the founder and CEO of a startup bank (Walton & Co), and was a leading analyst at Panmure Gordon, Williams de Broe, and Credit Suisse First Boston. He is acknowledged as the banks analyst that first called the onset of the Great Financial Crisis in August 2007, as well as making several key analyst calls on UK banks since then (e.g. LIBOR). Besides television and radio interviews and print coverage, he has also advised institutional investors, financial institutions and the UK government on banking issues.

1. Operating Performance Ratios
2. Regulatory Ratios
3. Bank Valuation Measures
4. Example of Analysis and Valuation in Practice - HSBC
5. Some Guiding Principles
6. ROIC Analysis - A Step-by-Step Guide
7. Calculating Invested Capital
8. Calculating Return on Invested Capital (ROIC)
9. Key Processes and Tools for ROIC Analysis
10. Linking ROIC Analysis to Valuation
11. ROIC Valuation - Calculating Value-Added Margin
12. Aggregative Value Creation/Destruction
13 Deriving a Fundamental ROIC Valuation
14. Deriving Implied Market Assumptions of Value Creation/Destruction
15. Forecasting with ROIC
16. Integrating Forecasts with Valuation.
17. Bank of China
18. Barclays
19. Citigroup
20. Credit Suisse
21. Deutsche Bank
22. JP Morgan
23. Lloyds
24. RBS
25. Standard Chartered


'Understanding banks has never been more important - so this book could not be more timely.'- Andy Haldane, Executive Director, Financial Stability, Bank of England
'Risk and return drive banks. Customers, investors, regulators and politicians need to know both. Does their return on capital exceed their cost of capital – really? And 'how close to the wind are they sailing' to get there? Chen's ROIC achieves this clarity, and enables comparisons, in a way that more typical measures plainly miss. ROIC is a harder metric for bankers to game, so expect some objections to this.'- Alan Hughes, former CEO First Direct, General Manager HSBC
'Whilst the macro focus in banking has rightly been around capital and liquidity; you should always look for organic growth in any successful business. Understanding how a bank's performance links to its valuation is a must for investors, regulators and bankers and this book shows you how.'- Eric Leenders, Executive Director of Retail, British Bankers Association
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