Proprietary Analytics and Tools
Footprint
Analytics
• Market Coverage and Footprint Share
• In-Footprint League Tables
• Footprint Growth and ROE
Winning / Competitiveness
Analytics
• Win/Loss Record: Winning %
• CompetitiveStrengthTM Ratings
• Demographic Patterns of Winning
‘What If’
Simulation
Analytics
• Branch Footprint +/- Simulator
• Adjacent Market Entry
• M&A Screen and Advantaged Owner Analytics
• M&A Combination Analytics
Predictive
Performance
& Value
Analytics
• Expected vs. Actual Share
• Expected Cost, Capital, ROTE
• Public and Private Bank Valuations
• M&A Acquisition Premiums
• Best-Fit Peer Selector; Peer Benchmarking
• Market Profit Pools
Downloadable analytics for your bank and all 4000+ US branch-based banks.
Footprint Analytics
Footprint Analytics
Market Coverage: the portion of a market (e.g. of an MSA) reached by a bank’s branch network
Footprint Share: share in the portion of the market where a bank has coverage
Market Share = Market Coverage x Footprint Share
Market share in isolation can give misleading signals on relative performance. Adding insight on Market Coverage and Footprint Share provides a deeper understanding of competitive performance
In Footprint League Tables: your rank vs. competitors in your footprint
League Tables bespoke to your own bank’s footprint provide a clearer understanding of relative performance in the markets you compete
In-Footprint Market Growth and ROTE: weighted average market growth and market profitability measures across your footprint of local markets
Use market metrics bespoke to your bank’s footprint to accurately assess your growth vs. market growth; your ROTE vs. market average ROTE
All BankVQ Footprint Analytics are calculated for both
Deposits and Mortgages with 5 years of historical data
Winning / Competitiveness Analytics
Winning / Competitiveness Analytics
What questions it informs:
- What’s my win/loss record and how does it compare to others?
- Which banks do I beat most often head-to-head? Who beats me?
- In which markets do I win more? Less?
CompetitiveStrengthTM Rating: bank rating – akin to sports rankings – that take into account how often you win (Winning %) and the strength of your competition.
CompetitiveStrengthTM Ratings can be used to compare, rate, or rank all banks – even if they do not compete directly. Ratings can also be used to measure strength of competition for each bank and strength of competition for geographic markets (Local markets, MSAs, States, Regions)
All BankVQ Winning% and CompetitiveStrengthTM are calculated for both
Deposits and Mortgages with 5 years of historical data
'What If’ Simulation Analytics
‘What-If’ Simulation Analytics
Branch Footprint +/- Simulator: Underpinned by BankVQ’s predictive analytics, the Branch Footprint simulator will quantify the delta impact on: deposits, deposit share, earnings, ROTE, cash flow and value if a branch is added – or closed – in any existing market. Value is based on net present value of cash flows over a 10-year period taking market growth, investment requirements and timing of market share impact into account
Adjacent Market Entry: Screen for opportunity markets for branch expansion and forecast performance upon entry
Screening and evaluation criteria include: proximity to current branches, market attractiveness (e.g. size, growth, concentration), competitive intensity (number and strength of existing competitors), and fit with patterns of winning. Economic evaluation incorporates predictive metrics for expected deposits, deposit share, earnings, ROTE, cash flow and value if a branch is added; value is based on net present value of cash flows over a 10 year period taking market growth, investment requirements and timing of market share impact into account.
M&A Screen and Advantaged Owner Analytics: Use flexible filters to create a prioritized list of M&A targets based on bank characteristics and synergy potential. Create separate target lists to support different potential M&A strategies (e.g. market expansion, market consolidation, small, strong ‘banks like me’, turnaround targets, value accretive MoEs). Target screening can also be focused on specific business lines (e.g. wealth, consumer (or commercial), real estate, cards/payments)
Advantaged owner analytics will inform who the best buyers are for a particular target. If you are interested in a target bank, study whom else may be interested in that same target and where you stand from a ‘maximum acceptable purchase price’ perspective.
M&A Combination Analytics: profile of a combination; synergy value and financial pro forma
Combination profile includes:
- Overlap assessment: geographic footprint overlap; business mix overlap
- Market presence: where, and to what degree, exposure to market deposits increases
- Market position: changes in share, rank, and winning % across geographic boundaries
- Footprint attractiveness: change in footprint participation mix along a range of market dimensions (e.g. skew towards growth markets; high income markets)
- Business mix similarity: degree of similarity or dissimilarity between the two banks’ business models (income, asset, and deposit lenses on similarity)
- Regulatory test for deposits: identifies markets that may be flagged by the Fed due to total market share, or increases in HHI, post combination
Synergy and Financial Pro forma includes:
- Cost synergy: cost savings from scale economics, branch rationalization, and cost performance improvement
- Market synergy: growth and profitability improvement from changes in market position
- Risk & capital synergy: reduction of capital buffer from risk reduction (e.g. scale and diversification benefit) and capital performance improvement
- Regulatory impact: expected deposits required to be shed based on market share and concentration tests, and expected changes in regulatory capital requirements
- Quantified uplift: in terms of earnings, capital, ROTE and value (10-year NPV)
Predictive Performance Analytics
Predictive Performance Analytics
Expected Share:
Predicted market share, calculated at the local market level, given the # and concentration of competitors, the CompetitveStrengthTM of each competitor, and the banks’ share of local market branches
Market Share Performance:
Expected share can be compared to Actual share to identify areas of under-performance or out-performance. These areas of under (out) performance signal opportunities or vulnerabilities
Expected Share > Actual Share = Share Gain Opportunity
BankVQ calculates Deposit Expected Share and Mortgage Expected Share for every bank x local market intersection
Expected Cost, Capital, ROTE
Grounded in empirical analytics for all US banks, BankVQ’s predictive models pinpoint the primary drivers of cost, capital, and ROTE and calculate Expected values for all banks.
The key drivers for each measure are used to explain differences in performance across banks and to improve performance benchmarking. Key drivers include:
- Cost drivers: bank scale (income, RWA, deposits), income mix, and branch footprint (number and location of branches, local market scale and position)
- Capital drivers: bank scale (income, RWA, deposits), income mix, risk asset mix, earnings volatility
- ROTE drivers: bank scale, business mix, ownership structure, bank risk measures, local market measures (e.g., market position, market scale, market concentration, market branch productivity)
Cost and Capital Performance:
Comparing your own bank’s Expected cost (or capital) vs. Actual will signal outperformance or underperformance
Comparing drivers of Expected cost (or capital) vs. peers helps explain why your cost or capital may be higher or lower than others – i.e. to what degree is it a function of scale, business mix, branch intensity, etc.
ROTE Performance: ROTE is predicted for every bank + local market intersection taking into account 1) local market drivers (e.g. market concentration, local market scale, local market position) and 2) bank institutional drivers of ROE (e.g. bank scale, business mix, ownership structure)
Example performance management applications:
- Understand why your ROTE is higher (lower) than peers/competitors, and levers to improve ROTE
- Understand how your bank’s ROTE differs across local markets and why
- Compare market attractiveness based on ROTEs for all the markets in which you compete
- Compare your ROTE to market average ROTE – market by market and/or overall for your footprint
Cost and Capital Synergy:
The predicted cost and capital drivers can also be applied to bank combinations to estimate synergy potential. For example:
- Institutional Scale: scale economies are estimated for the combination in relation to the acquirer and target standalone to predict scale-driven synergies for both cost and capital
- Local market costs: local market cost synergies result from overlapping branch footprints (e.g. branch rationalization and local market scale economies)
- Capital Synergy driven by Reduced Earnings Volatility: bank combinations often have diversification benefits that reduce earnings volatility and create the potential to reduce capital buffers
- Cost and Capital Performance Improvement: when the acquirer has better cost (capital) performance than the target (based on actual vs expected cost and capital), there is a potential opportunity to reduce cost and capital in line with the acquirers better performance levels
Public and Private Bank Valuations
Most US Banks are not publicly traded, so actual market values do not exist, and alternative valuation approaches are required.
BankVQ provides valuation estimates of every public and private bank based on a multiples-based market valuation and an intrinsic (discounted cash flow) valuation. These valuations are for the US banking business of each bank. For public banks, actual market valuations are also available but may not be comparable (if non-banking or non-US businesses are significant)
These valuations are useful in a number of ways:
- Understanding the drivers of market value and intrinsic value, and the levers for increasing value
- Comparing shareholder return performance across banks/peers over time, including comparison of public vs private banks
- Comparing market value vs intrinsic value to signal “are we under(over) valued by the market?”
- Assessing M&A opportunities – what is the target worth standalone? What might the purchase price be? Are synergy opportunities significant enough to overcome the likely purchase price?
M&A Acquisition Premiums
Purchase price premiums (the amount paid over the acquisition target’s market value) are clearly a primary driver of deal value creation and vary significantly across transactions. What explains the difference?
We have found that three primary drivers logically explain most of the variation in acquisition premia:
- Smaller target banks tend to have higher acquisition premiums (possibly explained by higher scale economies for acquirers)
- Target banks with higher market value to tangible equity ratios tend to have higher acquisition premiums (possibly explained by more profitable banks being more attractive to potential acquirers)
- Acquisitions in comparison to merger of equals have higher acquisition premiums (logically linked to control premiums)
BankVQ estimates the likely purchase price premium for acquisitions based on these drivers using empirical data from past transactions to calibrate our prediction models. These estimates are then applied to potential M&A combinations to inform estimates of potential value creation.
Best-Fit Peer Selector; Peer Benchmarking
BankVQ identifies best-fit peers for benchmarking, considering similarity in terms of: size, business model, and market overlap, generating four ranked peer lists: size peers, business model peers, market overlap peers, Overall peers.
Peer benchmarking compares how each peer performs competitively in their own footprint (e.g. rank, share, growth vs. market growth, winning %). Rolled-up US OpCo financials from Call Reports provide apples to apples financial benchmarking vs. peers.
Market Profit Pools
BankVQ’s predictive ROTE model provides the basis for quantifying market profit pools. Profit pools are quantified at a granular local market level for banks with local market branches, and can be rolled up across geographic or demographic boundaries