CHAPTER 8
Valuation of Fee-Based Activities
The fundamental bank valuation formula is concerned with on-balance-sheet activities, such as lending, deposit taking, and investing in bonds. As discussed in Chapter 4, banks also engage in off-balance-sheet activities, such as asset management, private banking, corporate advisory services, brokerage, and proprietary trading. A characteristic of many of these activities is that they generate fees and generally are conducted off the balance sheet. That is, few assets and liabilities related to these activities show up on the bank’s balance sheet.
These activities should be valued separately from the ...
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