Issues in valuation of banks

Abstract

There has been much talk of mergers and acquisition in the banking space of late in India.The key reason is the RBI roadmap (for 2009) which spells out clearly the process of entry of foreign banks in India in a way that they can acquire any private bank (up to 74% equity) without RBIs approval.This leaves the space open for M & A and a rush by even the domestic private banks to expand inorganically to avoid being eaten up by the larger foreign banks when the market fully open up.It is keeping this in mind that the independent Projects deals with the important topic of bank valuation in the financial services industry.Banking (and financial services) M&As are unique in a way that they are governed by a number of regulatory measures and hence have a number of peculiarities specific to them.This does valuation an extremely difficult task.The Undependable Project deals with the various difficulties/issues involved in banking valuation when compared with the normal valuation of manufacturing companies.