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Corporate Evaluation in Banks - Development of a New Evaluation Model with the Special Focus on the Separation of the Value of Maturity Transformation

Author(s): Svend Reuse

Journal: Financial Assets and Investing
ISSN 1804-5081

Volume: 2;
Issue: 1;
Start page: 6;
Date: 2011;
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Keywords: Corporate evaluation | banks | maturity transformation | market yield method

Banks have to be handled differently in the theory of corporate evaluation. After a critical discussion of existing approaches of corporate evaluation, the following results can be stated: As banks generate value by an efficient liability side, gross methods do not lead to reliable results concerning a bank’s value. Further, the effects of maturity transformation have to be separated as they do not increase the value of banks. The model developed by the author takes these aspects into consideration. By an integrated usage of the market interest rate method and the usage of secure cash flows, the CAPM approach could be avoided. The model separates the treasury effects and quantifies the value of a bank in a more realistic way. The first empirical test shows that the model works in practice.
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