The ABCs of Bank PBRs

15 Pages Posted: 13 Mar 2018

See all articles by Bilyana Bogdanova

Bilyana Bogdanova

Bank for International Settlements (BIS) - Monetary and Economic Department

Ingo Fender

Bank for International Settlements (BIS)

Előd Takáts

Bank for International Settlements (BIS)

Date Written: March 11, 2018

Abstract

Price-to-book ratios have been unusually low for many banks since the Great Financial Crisis. Ratios below one, in particular, have been seen as reflecting market concerns about banks’ health and profitability as well as the need for shifts in business models. But what drives these valuations globally? What explains consistently low levels for some banks and jurisdictions? This special feature proposes an empirical valuation methodology based on the intangible value attached to bank assets and liabilities. Our model fits the data well across time and banks, suggesting that measures targeting traditional drivers of profitability, such as the proactive management of nonperforming loans, remain essential in enhancing bank valuations.

JEL Classification: G21, G28, G3

Suggested Citation

Bogdanova, Bilyana and Fender, Ingo and Takáts, Előd, The ABCs of Bank PBRs (March 11, 2018). BIS Quarterly Review, March 2018, Available at SSRN: https://ssrn.com/abstract=3139235

Bilyana Bogdanova (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Ingo Fender

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

HOME PAGE: http://www.bis.org

Előd Takáts

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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