Bank price to book
A bank has common equity book value 900 and 90 million shares. A comparable P/B multiple is 1.3x. Find implied equity value and share price.
Worked answer
price: 900 × 1.3 ÷ 90 = 13
P/B is an equity multiple, so it directly implies equity value.
Technical follow-ups
Why are EV/EBITDA and industrial-company net-debt bridges often poor starting points for banks?
What sustainable ROE and asset-quality evidence would you want before calling a bank trading below book cheap?
Follow-up answer guide
Funding liabilities, including deposits, are integral to a bank business; interest is an operating input. Use consistent equity metrics with capital adequacy, asset quality and sustainable ROE rather than mechanically subtracting deposits from P/B equity value.
A fresh retry
A bank has common book equity of 1200, 100 million common shares, and an illustrative P/B multiple of 1.1×. Calculate implied common equity value and share price.
Inspect replacement inputs
shares: 100
multiple: 1.1
Check the retry bridge
price: 1200 × 1.1 ÷ 100 = 13.2
Original fictional example. Not a report of a specific firm’s interview. Explanations need qualified human review.