New Spanish Banking Conglomerates. Application of the Analytic Hierarchy Process (AHP) to their Market Value

Abstract

The Spanish financial system is undergoing profound changes, as a consequence of the present international financial crisis and the directives laid down by the European Central Bank (ECB). One of the most important of th ese changes is the emergence of new financial/banking conglomerates from the mergers of various savings banks and their transformation into IPSs (Institutional Protection Systems). Therefore, determining the value of these financial conglomerates and shares in these is of great interest. This study proposes a scheme which combines the multiple criteria AHP method with the valuation ratio of the International Valuation Standards. This new methodology can be seen as a comparative method or market approach and it only requires a limited number of comparable companies, with their corresponding qual itative and quantitative variables. For this study this valuation method has been applied to the de facto mergers of savings banks. Due to the current situation of the industry, the valuation of financial institutions of this type is a task of great interest and this also serves to showcase the strengths of the proposed methodology.