Research On Commercial Bank Value Assessment

With the further deepening of China’s financial reform, banking gradually intensifiedcompetition is facing with the huge transformation. An increasing number of commercialbank were reorganized and went public, also foreign capital and civilian battalion capitalgradually invested in China’s banking industry. Capital activities among banks such asmergers and acquisitions, reorganization, asset sales gradually increased. Therefore, valueassessment for commercial banks should be accurate and applicable, which ensure theseactivities carried out smoothly. At the same time, a reasonable assessment of the value ofcommercial banks is to provide the basis for the investors’ investment behavior, and thebank management operation decision.This paper first elaborated the main method in enterprise value assessment, includingcost method, income discount approach, market comparison method and real optionspricing method. Then analyzes the specificity of commercial banks in the operationpattern, kinds of service, capital structure, risk, supervision and so on, and summarizes themethods suitable for the commercial bank value assessment; Then take China MinshengBanking Corporation as an example. Considering the prospects of banking and MinshengBank financial information prediction, we select three kinds of business valuation methods.The result using free cash flow to equity is16.63per share. Economic value added methodgives the result of12.84per share and the assessment value is between8.42and15.25using market comparison method. Then we make sensitivity analysis on grow rate andcost of equity capital. Comprehensive consideration of the three kinds of method, wefinally get the share value of Minsheng Bank is between12.84and16.63. We know thestock price of Minsheng is7.72in December31,2013. Since the stock price isundervalued, Minsheng Bank has long term investment value; Finally, according to thetheoretical analysis and case study, we summarized the main factors affecting the value of commercial banks is the macroeconomic, corporate governance and strategy management,and analysis further improvement in the use of economic value added method and equitycash flow method in commercial bank assessment.