valuing financial companies

Bears and Stearns sbeen gobbled up for a paltry$2/per share by JP Morgan (Valuation of around $250 Million) today compared to its last trading price worth billions of dollars of market cap...on account of significant liquidity risks ----that posed a threat of shutting down the company if not bailed by an outsider...the trouble with Bears and Stearns was it dealt with too much mortgage securities....
That brings us to the fundamental question of taking into account the quality of assets( and balance sheet) while valuing an investment bank(or bank's or NBFC's ) .
After being in the financial indstry for two years..(in india)...I know that most of the finance companies act as punters (I touched on this industry characteristics way back in 2007)....

1) Very open minded credit screens( with loopholes that helps anybody to get loans)
2) lack of quality people at ground level to assess credit risks
3) stiff marketing targets(that drives every mktg guy crazy enough to sanction loans)
4) a Fundamental lack of accountability (which i guess is global)

Given all these factors...Banks might look good on paper but their true quality could be found out by the way the number of NPA's they have in their balance sheet...so keep a close eye for these numbers when you come across a financial institution....
1) Portfolio Mix
2) NPA accounted (a growing percentage generally smells trouble)
3) The kind of Equity mix involved with these securities (the higher the better)
Taking these factors into account ....

I find that banks exposed to the followig assets might face significant risks going forward.
1) Personal loans (on account of their lack of security to back-up on)
2) Housing loans (due to highly leveraged positions by employees in certain industry (IT in particular) that outstrips salary levels)

I believe commecial vehicles and construction equipment portfolios are relatively stable due to the reletively shortly payback cycle and the underlying quality of the assets to generate volume)

In short a business is like a human being (career , drive,education etc matters )just as generating profit matters for business...but at the end of the day balance sheet quality is vital (Health for human can be taken as a suitable anology) ...without health people die as organizations die without proper balance sheet quality...

However, the trouble with balance sheet problems faced by financial institutions are ...failures occur when things are not good (meaning failures are driven by events ..such as the recent mortgage chaos in the US)...mor of how to find if times are good or bad in another post