What it is
If the bank sold every asset, paid every debt and split the rest among shareholders, each share would get its book value.
Book value per share = total equity ÷ number of shares. With Rs 100 face value, a bank that has built reserves equal to its share capital has a book value of about Rs 200.
The market price is usually different. Price ÷ book value is the P/B ratio. A P/B of 1.5 means investors pay Rs 150 for every Rs 100 of book value, because they expect the bank to earn well on it.
For banks, book value is a meaningful anchor because most of their assets (loans, bonds, cash) are financial and recorded close to their real value.
How it is calculated
Book value per share = Equity attributable to ordinary shareholders ÷ Number of ordinary shares (ordinary share capital ÷ 100). Preference share capital is not counted as ordinary shares.
Worked on Nabil Bank Limited, FY 2082/83 Q4
NABIL's total equity of Rs 7,190.66 crore spread over its 27,05,69,970 ordinary shares gives a net worth of about Rs 247.28 per share at the end of FY 2082/83 Q4, as the filing's ratio table computes it. The Graham number uses this figure with EPS.
NABIL's share capital includes Rs 500.00 crore of preference shares, so per-share figures here use its 27,05,69,970 ordinary shares, as the filing does.
What good looks like
Rising every year is the sign of a bank that keeps and compounds profit. Compare price to book value across banks; a lower P/B is cheaper only if the ROE is comparable.
Watch out
- Bonus shares lower book value per share (more shares, same equity) with no change in what you own in total.
- Equity includes locked reserves; book value is not what you could be paid.
- Fair value swings on investments move book value without any change in operations.
- Where preference shares exist, use ordinary shares and the equity that belongs to ordinary holders, as the filing's ratio table does.
In Nepal
Nepali filings print 'Net worth per share' in the ratio section. Face value is Rs 100, so shares = paid-up capital ÷ 100. For a bank with preference shares, the ratio is per ordinary share.
Questions
Not necessarily. A bank earning a high ROE deserves a price above book; a bank with low ROE or hidden bad loans may trade below it.
The same equity is now split across more shares. Your total book value is unchanged.