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VELA Summary Bank Model
Documentation (PDF)
Inputs
Assumptions
Ticker
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Required Return (%)
\(r_r\): Required rate of return (discount rate) — the investor's minimum acceptable return.
Industry
Dividend/Share
\(D\): Trailing twelve-month dividends.
\(DPS_t = \dfrac{NI_t \cdot (DPR/100)}{SC_0}\)
Current Price
\(P_0\): Current stock price.
Dividend Payout Ratio (%)
\(DPR\): Dividend payout ratio — percentage of earnings paid as dividends. Typically \(\text{Dividends} / \text{Net Income}\).
Calculated Terminal Multiple P/B (x)
\(adjPB_5\): Adjusted price-to-book multiple at year 5.
\(adjPB_5 = \dfrac{P_0 / TBVPS_0 + 1}{2}\)
Manual Terminal Multiple P/B (x)
User override for the terminal P/B multiple. If set, replaces the calculated \(adjPB_5\) in the terminal value calculation.
Base Year
Terminal Year
Return on Equity (%)
\(ROE_0\): Base-year return on equity — measures how efficiently the bank generates profits from its equity base.
\(ROE_t = ROE_0 + \frac{t}{5}(ROE_5 - ROE_0)\)
Return on Equity (%)
\(ROE_5\): Terminal-year return on equity target.
\(ROE_t = ROE_0 + \frac{t}{5}(ROE_5 - ROE_0)\)
Net Income ($B)
\(NI_0\): Net income for the base year.
Net Income ($B)
\(NI_5\): Terminal-year net income.
\(NI_t = TBV_{t-1} \cdot \dfrac{ROE_t}{100}\)
Tangible Book Value ($B)
\(TBV_0\): Base tangible book value — shareholders' equity excluding intangible assets.
Tangible Book Value ($B)
\(TBV_5\): Terminal tangible book value.
\(TBV_t = TBV_{t-1} + NI_t(1 - DPR/100)\)
Share Count (#M)
\(SC_0\): Share count at the start of the period (in millions).
Share Count (#M)
\(SC_5\): Projected share count at year 5 (in millions).
Tangible Book Value/Share
\(TBVPS_0\): Tangible book value per share.
\(TBVPS_t = \dfrac{TBV_t}{SC_0}\)
Tangible Book Value/Share
\(TBVPS_5\): Terminal tangible book value per share.
\(TBVPS_t = \dfrac{TBV_t}{SC_0}\)
Valuation
Estimate of Intrinsic Value
\(IV\): Intrinsic value — present value of projected dividends plus discounted terminal value.
\(IV = \displaystyle\sum_{t=1}^{5}\frac{DPS_t}{(1+r)^t} + \frac{TV_5}{(1+r)^5}\)
Intrinsic Value in Year 5
\(TV_5\): Terminal value — estimated value at end of year 5.
\(TV_5 = TBVPS_5 \times adjPB_5\)
Premium/Discount to Intrinsic Value
Price / IV = \(\dfrac{P_0}{IV}\). Above 1 means the stock trades above estimated value; below 1 suggests undervaluation.
Expected Return
\(r^*\): Expected return — the IRR that sets NPV to zero.
\(0 = -P_0 + \displaystyle\sum_{t=1}^{4}\frac{DPS_t}{(1+r^*)^t} + \frac{DPS_5 + TV_5}{(1+r^*)^5}\)
Years
Year
Trailing Year 3
Trailing Year 2
Trailing Year 1
Base Year
Year 1
Year 5
Return on Equity (%)
\(ROE_t\): Return on equity, linearly interpolated.
\(ROE_t = ROE_0 + \frac{t}{5}(ROE_5 - ROE_0)\)
0
0
0
0
0
0
Net Income ($B)
\(NI_t\): Net income based on prior year's book value and ROE.
\(NI_t = TBV_{t-1} \cdot \dfrac{ROE_t}{100}\)
0
0
0
0
0
0
Share Count (#M)
\(SC_0\): Share count (in millions).
0
0
0
0
0
0
Dividend/Share
\(DPS_t\): Dividends per share.
\(DPS_t = \dfrac{NI_t \cdot (DPR/100)}{SC_0}\)
0
0
0
0
0
0
Tangible Book Value/Share
\(TBVPS_t\): Tangible book value per share.
\(TBVPS_t = \dfrac{TBV_t}{SC_0}\)
0
0
0
0
0
0