Question

In: Finance

Consider the split of an unviable bank into a Good Bank and a bad bank in...

Consider the split of an unviable bank into a Good Bank and a bad bank in a country called FinBankLandand. At this stage you have not offered the Good Bank to any banks within FinbankLandand to Purchase or merge. As a consultant to the FinBankLandand bank regulator, explain the strategy you would suggest to ensure a smooth sale of Good Bank

Solutions

Expert Solution

We need to prepare a sales pitch-book clearly showing the investment highlights for any potential buyer of the Good Bank:

  1. Operating Parameters:
    1. Show the loan book
    2. Highlight the fact that after restructuring, the non performing assets (NPAs) is nearly zero
    3. Delinquency ratio is zero
    4. Balance sheets are clearly separated between the Good Bank and Bad Bank. There is no linkage or liabilities.
  2. Path to sustained profitability
    1. Highlight how the Good Bank will continue to remain in sustained profit zone
    2. Highlight the key management profile and their ability to generate profits for the Good Bank
    3. Show the markets and revenue potential over medium term (3 to 5 years)
  3. Approach the strategic investor with the pitch book
  4. Develop a sense on valuation based on loan book size and some relevant multiple
    1. Typically P / B is the appropriate multiple for valuation
  5. Work upon a timeline for entire sale process

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