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Valuation of Banks

Questions › Category: Valuation Quadrant › Valuation of Banks
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Fay Poh asked 1 year ago

Hi! Understand that we should use P/B ratios to look at banks...

  1. Total Book Value = Net Assets - Net Liabilities ( I can find this in the annual report)
  2. The formula for P/B ratio is share price/(book value/share) right? cos i cant find the book value/share figure in the annual report... where can i find it?
  3. IV of a stock - PB ratio (ten year average) X Trailing Book value/share in the last year?

Thanks :)

1 Answers
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Victor Chng Staff answered 1 year ago
Hi Fay,


1. The book value is the equity  2. As mentioned in point 1 use the equity 3. yes, average 10Y PB multiply by TTM book value per share
Fay Poh replied 1 year ago

For the second point – if the P/B ratio is calculated by share price / (book value per share), and equity is book value but how do we get equity PER share?

Fay Poh replied 1 year ago

For the first point – meaning when we search the annual report for book value, we just use figures for equity, instead of taking total assets – total liabilities?

For the second point – if the P/B ratio is calculated by <strong>share price</strong> / <strong>(book value per share)</strong>, and equity is book value but how do we get equity PER share? take equity/outstanding shares??

Victor Chng Staff replied 1 year ago

Hi Fay,

The equity can be found in the balance sheet under equity attributed to shareholders. Take that figure and divide it by the number of shares.

Equity’s formula is total assets – total liabilities, which is what you are looking for