Discussion On Equity Pricing Of State-Owned Banks

In recent years, state-owned commercial banks in China get rid of thelong plight of the high non-performing asset rate through reorganization andreform, and have a sharp rise in profitability, especially in the global financialcrisis in2008, thriving in the world financial industry. In contrast to it, theequity price of the state-owned banks has not a satisfactory perform and Bankof America as a representative of strategic investor has left with cash. Thepaper attempts to analyze state-owned banks in China deeply to discuss onthe equity pricing of state-owned banks. The research significance is not onlyto provide a reference basis for public investors' decisions in capital market,but also to accelerate the further market operation and provide guidance onoverall strategic planning for banking development to Strategic PlanningCommittee, affiliated to the board, if main factors influencing the equitypricing of state-owned banks can be caught.The first chapter section introduces the research background andsignificance. Through capital adequacy, asset quality, management level,earnings and liquidity risk, five core indicators, Chapter2evaluates theoverall situation of the state-owned commercial banks. The third chapterdescribes how to use the relative valuation method and absolute valuation method to estimate the value of banking equity; relative valuation method isnot as directly as absolute valuation method which has been finished throughthe internal driving factors of the corporation equity value, but through thecomparative analysis of similar companies assess equity value indirectly;these two methods have their own advantages and disadvantages, in thegeneral case, absolute valuation method is used in banking industry, referringrelative valuation method. In Chapter4Three-stage Dividend DiscountModel, one of absolute valuation methods, is used to estimate the intrinsicequity value of China Construction Bank quantitatively. Chinese state-ownedbanks are in a period of rapid growth currently and have stable policy ofdividend allocation; they are consistent with the assumptions of Three-stageDividend Discount Model. The last chapter discusses the decision-makers'motives to introduce foreign capital and suggests that Chinese governmentand the relevant regulatory authorities could insist on deepening market-oriented reforms of state-owned banks in order to promote the corecompetition ability continuously in the global financial field.