The Problems of Valuation of Commercial Banks

The fact that the issue of the company valuation problems does not cease to be relevant over time is fully justified, because any business periodically faces the need to determine its value in the process of carrying out its activities. In the context of banking sector organisations study, it must be argued that despite the presence of significant theoretical and practical experience on the valuation of non-financial companies in the domestic and international system of scientific knowledge, approaches to the valuation of banking business at the moment do not fully take into account the specific features and risks characteristic of credit institutions. The aim of this paper is to develop an effective method of commercial banks valuation and to determine the factors affecting their value. To achieve it, the author has identified specific features of credit institutions, necessitating a special look at their valuation. Then, the existing approaches to the valuation of commercial banks, namely, Discounted Returns Models, Relative Valuation and Asset/Liability-Based Valuation were analyzed in detail, and the problems arising in their implementation were identified. Further, based on the findings of the analysis, the author developed a method of commercial banks valuation on the basis of a linear regression model and identified the factors that have the greatest explanatory value for the value of banks. The resulting model of commercial banks valuation that meets the statistical requirements of quality and efficiency, as well as the theoretical conclusions based on the results of the study can be of value to researchers in the field of finance, banking and valuation activities as well as interested in determining the value of business managers and shareholders of banks.