Valuing a bank can be challenging and confusing, but it doesn’t have to be. Here’s the deal:
Book Value per Share is one the easiest accounting formulas out there that can help us determine the value of a bank or financial firms equity.
We will walk through this formula and how to find the numbers to plug into the formula, and voila! You will have a number that you can use to help you determine the value of that bank you are interested investing in once you find the right price.
I have said this before but valuing banks should be as straightforward as valuing any other company that you are interested in putting some money into.
There are just some different ratios and formulas that we need to know to help make it easier.
This idea comes straight from Warren Buffett, and if it is good enough for him, it is certainly good enough for me.