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Comerica Incorporated: The Valuation Dilemma
Allayannis, George (Yiorgos); Ramraika, Baijnath Case F-1581 / Published March 10, 2009 / 16 pages.
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Product Overview

In early September 2008, in the midst of the subprime crisis, a manager with the student-run Darden Capital Management fund, wants to evaluate whether Comerica Incorporated, a regional bank based in Dallas, Texas, is a good candidate for inclusion in his portfolio. He needs to perform a valuation of the bank to assert whether the bank seems to be undervalued by the market or whether a further decline in value might be possible. He must account for all the factors that affect bank valuation, both as related to the bank itself as well as to the current market conditions. The case can be taught to: a) examine the valuation of a bank during turbulent times; b) understand the key accounting statements (balance sheet and income statement) for a bank and how they may differ from those for an industrial company; and c) understand the key value drivers of bank value (metrics for profitability, credit quality, liquidity, and capital).


Learning Objectives

To examine the valuation of a bank during turbulent times. To discuss alternative bank models such as commercial versus investment banking. To understand the key accounting statements (balance sheet and income statement) for a bank and how they may differ from those for an industrial company. To understand the key value drivers of bank value (metrics for profitability, credit quality, liquidity, and capital); how do banks make money and how can analysts figure out whether value has been created?

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  • Overview

    In early September 2008, in the midst of the subprime crisis, a manager with the student-run Darden Capital Management fund, wants to evaluate whether Comerica Incorporated, a regional bank based in Dallas, Texas, is a good candidate for inclusion in his portfolio. He needs to perform a valuation of the bank to assert whether the bank seems to be undervalued by the market or whether a further decline in value might be possible. He must account for all the factors that affect bank valuation, both as related to the bank itself as well as to the current market conditions. The case can be taught to: a) examine the valuation of a bank during turbulent times; b) understand the key accounting statements (balance sheet and income statement) for a bank and how they may differ from those for an industrial company; and c) understand the key value drivers of bank value (metrics for profitability, credit quality, liquidity, and capital).

  • Learning Objectives

    Learning Objectives

    To examine the valuation of a bank during turbulent times. To discuss alternative bank models such as commercial versus investment banking. To understand the key accounting statements (balance sheet and income statement) for a bank and how they may differ from those for an industrial company. To understand the key value drivers of bank value (metrics for profitability, credit quality, liquidity, and capital); how do banks make money and how can analysts figure out whether value has been created?