Hi guys, sorry if this is a stupid question. I am currently in an internship where we have to value a bank. I understand that you should use ddm/fcfe for Financial institutions, but then you get the equity value and not the enterprise value. If you want the enterprise value, do you just get there through a standard Ev-equity bridge?
Thanks for your help
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You usually wouldn’t want to get to an EV, as there is not any informative way to incorporate net debt as you would with corporates.
Is there any particular reason you would be interested in the EV here?
Ok apparently I don't really understand the time when to use EV and when to use equity value. I just thought that you would always use EV, since it actually shows the cost and value of the entire business, not only the one directly tied to equity shareholders.
pretty sure you don't calculate EV for Banks.
What i'm curious about is how to calculate beta for Banks - i assume you still de-lever beta from comps and then relever to Target's debt/equity ratio?
Not sure what the standard is across banks, but we never use unlever and relever beta.
If we want to know the cost of equity, we do (one of) the following:
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