ABA Banking Journal - April 2008 - (Page 16)

briefing ABA NATIONAL CONFERENCE FOR COMMUNITY BANKERS REPORT BANK VALUE continued from page 12 What is value? “Value” has many definitions, Moeling warned. What the bank can be sold for; value for stock repurchase; fair value; going concern value; stock price; and more—all facets of it, and yet, sometimes, not what anyone’s looking at. “It’s quite usual for bank boards and CEOs to be quite delusional about value,” said Moeling. Often the price level that the board would be willing to sell at is based on pride as much as fact. “’We’re selling at 3.5 times books because we’re better than those other guys’,” may be great for It’s quite usual for bank boards and CEOs to be quite delusional about value boardroom morale, said Moeling, but may not be reality. Moeling actually questioned the industry fixation on book value multiples when boards and bankers think about the price that would cause them to sell. “If you want a high price to book,” quipped Moeling, “let me run your bank for six months. I’ll drive your book value right on down, and you’ll see amazing values times book.” He recalled how his firm has recently helped a client bank sell for five times book. Of course, he admitted, “the bank only had 4% capital” at the time. Moeling said that a good deal of the market’s perceived value for a bank stock has virtually nothing to do with the efforts of the bank’s management team. In actuality, he said, nearly half of current values hinge on the market’s perception of the entire banking sector, at that point in time. “And you can’t control the sector,” said Moeling. “Directors don’t understand that, but there’s nothing you can do about that.” Many banks, right now, face a triple whammy: bad sector, bad region, bad year. And given that triple play, said Moeling, they aren’t going to have any success fixing their stock price for some time. (More coverage of this session can be found on www.ababj.com.) BJ 16 APRIL 2008/ABA BANKING JOURNAL http://www.ababj.com http://www.ababj.com/subscribe http://www.ababj.com/subscribe

Table of Contents Feed for the Digital Edition of ABA Banking Journal - April 2008

ABA Banking Journal - April 2008 Contents Editor's Column You Can't Beat Wal-Mart: Or Can You? Snapshot: Non-Interest Income Shoulders More Weight ABA National Conference for Community Bankers Report 100th Anniversary: Then & Now ABA Resources ABA Chairman's Position Banks Plus Insurance: How to Make It Work Pass the Aspirin 2008: Year of Rich Internet Apps? Tough Time For That IPO Your Audience Needs to Know Who You Are Telepresence: Costly But Very Cool Webnotes Better Websites Mean Tougher Compliance Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - April 2008

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