Værdiansættelse af Kreditbanken A/S

Peter Nyborg Therkildsen

Student thesis: Master thesis


Following the financial crisis several Danish banks have filed for bankruptcy and most listed banks trade at a price to book ratio below 1, meaning the market value of the banks are substantially below the equity of the banks as specified by their annual reports. This observation makes it interesting to test whether an indepen-dent valuation of a case bank can justify the markets valuation. The following thesis value Kreditbanken A/S. Kreditbanken A/S is a small local bank situated in southern Denmark with branches in Aabenraa, Haderslev and Sønderborg. The bank offers standard bank products for individuals and small corporations. The bank has a well diversified loan portfolio with 55 % of loans being corporate loans and 45 % private loans. The valuation of Kreditbanken A/S is based on a description of the bank, a description of the banking sector in Denmark and an analysis of the bank's performance based on annual accounts. This shows that Kreditban-kens A/S does not have any restrictions on shareholder voting rights as opposed to several other Danish banks of comparable size. The bank has three large investors owning 39 percent of the bank. Furthermore it is shown that the bank on most parameters has performed better than an average of comparables. Though the bank has had relatively high loans impairment charges the bank has a large capital base and the individual capital assessment is close to the minimum of eight percent. The bank is well funded with deposits, which is the cheapest way for the bank to fund itself. The chosen valuation model is a special bank valuation model developed by Jean Dermine, a professor at INSEAD. The model is presented in the thesis and it is argued why this model is more suitable for valuing banks than more traditional valuation models. The model divides the market value of the equity in the bank into two parts. Firstly the liquidation value, being the equity value based on an estimated market value of the bank's current balance sheet, is estimated. Secondly the franchise value is estimated. The franchise value is the value of the bank's continued operations. The franchise value can be decomposed into the present value of loans, deposits and fee generating activities minus the present value of expected operating costs and taxes. The estimated value of Kreditbanken A/S as of 31 Marts 2012 is DKK 331 million. This value decomposes into a liquidation value of DKK 170 million and a franchise value of DKK 161 million. The valuation is shown to be very sensitive to changes in the cost of equity and modelled interest margins. The market value of the equity implied by the stock price 31 Marts 2012 is DKK 293 million. The share price is compared to a peer group and the price to book value is shown not to be significantly dif-ferent from the peer group's price to book value when several performance parameters are taken into ac-count. The estimated value of Kreditbanken is 13 percent higher than the market value implied by the stock price. Based on the performed financial statement analysis and peer group analysis no specific factors can be de-termined to explain the difference between the estimated value of the bank and the value implied by stock price. The Jean Dermine model is however very sensitive to changes in specific parameters. Thus even a small change in these parameters can result in the estimated value and market implied value being equal. It is finally concluded that even though the estimated value of the bank differs slightly from the markets val-uation the independent valuation conducted in this thesis can support the markets valuation of Kreditbanken. This conclusion is supported by the conducted financial statement analysis and the peer-group analysis.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2012
Number of pages93