CHAPTER 5
The Valuation of Banks, Part 1
MARKET MULTIPLES, DISCOUNTING FUTURE DIVIDENDS, PRESENT VALUE OF FUTURE ECONOMIC PROFITS, AND THE FUNDAMENTAL VALUATION MODEL (NO CORPORATE TAXES, NO RISK)
To create value in banking, it is first necessary to understand the drivers of value. As shown in this and the following chapters, a sound and explicit bank valuation model is a very powerful tool for evaluating decisions and enhancing shareholder value. These decisions include deposit and loan pricing, risk-adjusted performance evaluation, and capital management. Although many books discuss the valuation of nonfinancial companies, very little has been ...
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