Investment Value Evaluation Of Industrial And Commercial Bank Of China Based On Residual Income Model

China’s bank industry has implemented shareholding reform since 2005, there have been listed 16 banks. Investors focus on bank stocks because of outstanding performance and high liquidity. However, the development of online finance and implementation of interest rate liberalization make banks get great impact. In 2005, the profitability and net interest margin of bank fell sharply, which affected investor’s confidence. Investors most focus on whether banks have investment value or the realization of expect return.Bank investment value is defined as the value of stocks in the secondary market, comparing intrinsic value and stock price. The focus of this article is to evaluate the intrinsic value of banks, the core is to select evaluation method.Firstly, this article summarizes the particularity of banks from business assets structure, profit model, risk and supervision to find out the difficulty of bank investment value evaluation. Analyzing the reason why traditional evaluation methods do not apply to banks. And then introduce the residual income model, through introduction of Dupont system and prediction for wireless stage to improve the basic model, make it simple and easy. This model focus on combining particularity of banks and influence factors to modify sales revenue, sales net interest rate and capital cost, aiming at building up a suitable residual income model for banks.Secondly, applying modified residual income model. Do qualitative and quantitative analysis on macro and micro factors which affect investment value, using residual income model to calculate ideal value of stock on December 31, 2015. Compare the result with actual price and judge whether the value is undervalued. Finally, draw conclusions according to results. Market failed to reflect the real value of banks, giving suggestion for investors and managers. Banks have already passed gold period, there will still have residual income in the future.