Overview
Bank valuation is a subset of general firm valuation. However, there are aspects of bank valuation that make it particularly hard to do.
Two Valuation Model
The two valuation model segments the bank into two separate businesses where the bank value is the sum of the two.
{% Bank \, Value = Fee \, Based \, Value + Fund \, Value %}
- Fund Managment - the fund management business recognizes that the deposit taking and loan underwriting portion of a bank functions much like a leveraged hedge fund.
- Fee based business - in addition to managing assets, as above, most banks will collect fees. The discounted value of the fees minus expenses represents a separate value to the fund management segment.