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Financial Services Firms: Governance, Regulations, Valuations, Mergers, and Acquisitions, 3rd Edition by Zabihollah Rezaee

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Chapter Eleven

Financial Analysis of Banks and Bank Holding Companies

The analysis of the financial performance of a bank to be valued is one of the most essential parts of the valuation research process. The financial performance, however, is only the quantified reflection of the management of the institution. In other words, the financial statistics are not the bank, but they represent a scorecard of how well the bank is organized and operated. Consequently, a thorough analysis of the financials provides an objective assessment of performance. The financial data presented in this chapter are taken from the Uniform Bank Performance Report (UBPR) prepared by the Federal Financial Institutions Examination Council, the National Information Center (NIC) and the Bank Holding Company Performance Report (BHCPR).1

Types and Sources of Financial Data

Banks, because of their regulated nature, are required to submit substantial amounts of financial data to regulators. Much of the financial information is made available to the public. The format of reporting is identical, which allows for apples-to-apples comparisons across banks of different sizes and in different locations with the knowledge that the information is probably 99 percent consistent.

Financial information on banks and bank holding companies (BHCs) is available on an individual basis or in total for various peer groups. In a typical valuation, information at both levels is beneficial; then it is possible to analyze the bank ...

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