Abstract
The purpose of the 'tutorial' paper is to present a model to value banks. First, three traditional models are summarised briefly. Next, a 'fundamental' bank valuation model is introduced. Based on sound economics and finance principles, it allows to identify the various sources of value and to derive managerial implications, such as the measurement of interest rate risk on non-maturing deposits. A first contribution includes the breakdown of the value of equity into two parts: a liquidation value and a franchise value. A second contribution is to call the attention of the corporate bond market, instead of the equity market, to find adequate risk premium to value banks. The valuation model concerns on-balance sheet banking business, such as deposit taking and lending. Off-balance sheet business, such as advisory services, can be valued with standard corporate finance tools.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Banking, Accounting and Finance
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
