Russian banks and other financial institutions with State ownership have run into a problem of international sanctions, which restrict their access to traditional sources of foreign capital. Refocusing on other international sources of funding uncovered another problem, i.e. valuation of Russian banks with State ownership for foreign investors, taking into account the international sanctions. However, the methods of valuation are rather undeveloped in the Russian Science. The paper addresses the problem on the case of a Russian bank partially owned by the State. In this paper, we have achieved the goal of calculating the market value of a bank using the most appropriate method of valuation in conditions of imposed international economic sanctions. We have analyzed specifics and constraints of three main approaches to the valuation and considered the newest valuation techniques. We have concluded that in conditions of the sanctions, the most reasonable valuation method is the Edwards-Bell-Ohlson Residual Income Valuation Model. We have identified constraints of valuation techniques developed in the West for specific Russian conditions in terms of capital flow limitations imposed by international partners. We have found a way to overcome the limitations of the application of this method in conditions of the sanctions, i.e. by using a discount rate. Due to impossibility to correctly apply the Capital Asset Pricing Model (CAPM) by using a discount rate and the arbitrage pricing model, the cumulative model of discount rate calculation has been identified as the most correct and appropriate. We have developed and applied a mechanism to value adjustments depending on the imposed sanctions. The article substantiates the use of the method of residual income valuation of modern Russian State-owned banks under sanctions as the most appropriate one for the current situation on international capital markets. It is concluded that under the conditions of imposed sanctions on our country, when assessing banks with State ownership the method of residual income is the most suitable. We apply the method to Russian conditions under the computational model, which has been worked out during the study.
Keywords: valuation, bank, economic sanctions, residual income valuation method, cumulative model, discount rate
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