Assessing and Preparing the Business Plan for a Bank
Forecasting bank earnings may appear to be something of a lottery with so many uncertain line items.
Stephen Frost, The Bank Analyst's Handbook
The purpose of this chapter is twofold: we will first present a framework to analyze the business plan of a bank from a valuation perspective, and we will then provide guidelines for preparation of the business plan itself. As a matter of fact, the business plan is the fundamental input of the valuation process. Assessing its sustainability and highlighting areas of potential inconsistency might have a critical impact on the final valuation and requires not only strong judgment but also a solid method.
If the business plan already exists and is available to the analyst, there are three broad categories of checks that can be performed: