Methods of bank valuation: A comparative study among Turkish banks

Bank valuation is a crucial aspect of the financial industry, as it helps stakeholders make informed decisions about investment and risk management. The Turkish banking sector is no exception, and it is important to analyze the different methods of bank valuation to determine their reliability and relevance in this context. This research aims to provide a comprehensive analysis of various bank valuation methods in the Turkish banking sector and evaluate their accuracy and reliability. The study begins with a literature review of previous discussions on bank valuation and an overview of different valuation frameworks. The sector analysis portion of the study focuses on the economic environment in Turkey, including the characteristics of the Turkish banking sector and any relevant economic issues facing the country, such as the Turkish Lira and high inflation. These factors can significantly impact the performance of valuation methods and should be taken into account. Through a case study research design, data will be collected on a selection of bank peers in Turkey, including AKBANK, VAKIFBANK, HALKBANK, IŞBANK, GARANTIBANK, and YAPIKREDI. These banks have been chosen based on size, market share, and performance metrics. The study will also include a discussion of the general assumptions made in the analysis, including economic, sector, and method-specific assumptions, as well as assumptions related to the cost of equity and growth. The selected valuation models, including the Free Cash Flow to Equity (FCFE) model and the Residual Income (RI) model will be applied to our sample. The results of the analysis will be compared and evaluated in relation to the market value of bank shares. The accuracy and reliability of these methods will be discussed, and the implications of the findings for practitioners and policy makers in the financial industry will be considered. This research will contribute to the existing literature on bank valuation by highlighting the unique challenges and considerations specific to the Turkish bank sector. The results suggest that the performance of valuation methods can be influenced by macroeconomic indicators and market conditions, which should be taken into account when applying these methods in different contexts. Overall, this study aims to provide practical insights for stakeholders in the Turkish banking sector and underline the importance of a comprehensive approach to bank valuation. By analyzing the different methods of bank valuation and their performance in the Turkish context, this research aims to help analysts and researchers make informed decisions about investment and risk management in the evolving banking environment.