Bank Valuation and Value Based Management: Deposit and Loan Pricing, Performance Evaluation, and Risk, 2nd Edition, 2nd Edition

CHAPTER 9

Value-Based Management in Banking: An Introduction

PERFORMANCE METRICS FOR VALUE CENTERS

This chapter introduces corporate financial objectives for banks, both at the overall level of the bank and at the decentralized level of profit centers.¹ This will lead to a discussion of fund transfer pricing for deposits and loans in Chapter 10.

Value-based management refers to the corporate objective of increasing the wealth of the shareholders of a corporation. An increase in the share price and a dividend payment both contribute to increases in wealth. Although this type of management might be expected in a capitalist society, it is often seen ...