One sector that is heavily represented in most Australian’s portfolios is the banking sector. In this summary of Merlon's recent teleconference, we overview our valuation metholodgy as applied to Australian banks, where we see value and the outlook for the sector. Merlon invest in undervalued companies based on sustainable free cash flow and franking. We value all stocks the same way and for banks, this reflects long-term views of interest margins, expenses, bad debts and capital. We combine valuation upside with our conviction score which focuses on why a company is undervalued.