Spanish Savings Banks and their Future Transformation into Private Capital Banks.Determining their Value by a Multicriteria Valuation Methodology

Abstract

As the result of the current international financial crisis and due to Basel II and Basel III Capital Accords, the Spanish financial system is undergoing profound changes. Among the most significant changes are the mergers of savings banks and their future transformation into private capital banks. Therefore, determining the value of these financial companies and their share prices is of great interest for different economic agents. This paper presents the application of a multicriteria method called CRITIC, combined with the valuation ratio, which together compose a valuation model. This new approach can overcome some of the problems faced by the traditional valuation methods since it calculates the value of a company by comparing with similar companies whose value is known. The comparison is made using criteria or variables which are indicative of the value of these types of companies. A case study is presented in which the combined methodology is applied to the valuation of a particular Spanish savings bank.