Confirmatory Bank Due Diligence

Trust but verify.

—Ronald Reagan

Confirmatory due diligence of a bank acquisition target is a time for digging deeper. Once a potential acquirer has conducted a preliminary study or preliminary due diligence of a target bank to estimate its value, risks, and a ballpark price, then it is time for a closer look at the bank in light of a future combination. In Chapter 6, we described the main factors of a bank’s typical balance sheet and income statement, which can be used to analyze (as well as manage) various bank risks, and reported commonly used ratios. We also discussed the related topics of stress testing. In this chapter, we will take a closer look at bank solvency through an in-depth review of finances, ...

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