Valuing Banks

Contents





List of Tables



List of Figures



Acknowledgements



About the Authors



Preface



Introduction



1. Valuation inBanking: issues and models



1.1 Introduction

1.1.1 A different roleof equity: the regulatory constraints

1.1.2 The role of debt

1.1.3 Loan loss provisioningand charge-offs

1.1.4 Cash flowestimation



1.2 Valuation Methodsof Banks: a critical review

1.2.1 Discounted cashflow models

1.2.2 Excess returnsvaluation

1.2.3 Asset andmixed-based valuation

1.2.4 Relative marketvaluation

1.2.5 Contingent claimvaluation



1.3 Conclusions





2. Value, Capitalstructure and cost of capital: a theoretical framework



2.1 Introduction



2.2 Limitations of theEquity Side Approach



2.3 An Asset SideApproach to Banks Valuation: An Introduction



2.4 Banks' Cost ofCapital and the Modigliani-Miller Propositions

2.5 Banks Valuation: AScheme with Separate Quantification of Mark-Down

2.5.1 Valuation schemewithout taxation and growth

2.5.2 Valuation schemewith tax benefits

2.5.3 Valuation schemewith taxation and growth

2.5.4 The AMM: anoverview



2.6 The Restatement ofModigliani and Miller's Theories for the Banking Industry

2.6.1 Absence of taxes

2.6.2 Presence of taxes



2.7 Consistency of theAMM Model with Excess Returns Models

2.8 Conclusions





3. Measuring the CashFlows of Banks: the FCFA Asset Side Approach



3.1 Introduction

Federico Beltrame is Lecturer in Banking and Financein the Department of Economics and Statistics, University of Udine, Italy. Heholds a PhD in Business Science from the same University. His main researchinterests are related to SMEs' cost of capital, banks' capital structure andMutual Guarantee Credit Institutions.

Daniele Previtali is post-doc fellow and lecturer atLuiss Guido Carli University, Rome, Italy. He holds a Ph.D. in Banking and Financefrom University of Rome, Tor Vergata, Italy. In 2012, he was a visiting PhDcandidate at Stern School of Business, New York, USA. His main researchinterests concern banks valuation, banks' capital structure and innovation.