CHAPTER 6
The Valuation of Banks, Part 2
THE FUNDAMENTAL VALUATION MODEL (WITH CORPORATE TAXES AND RISK)
Chapter 5 introduced four methods for the valuation of banks: market multiples, present value of dividends, present value of economic profits, and a fundamental bank valuation model for valuing on-balance-sheet banking business. The last approach decomposes the value of a bank into four components:
1. The liquidation value of the current balance sheet
2. The franchise value of deposits
3. The franchise value of loans
4. The present value of operating expenses
The step-by-step presentation in Chapter 5 ignored corporate ...
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