FIG (Banks & Insurance)
Why is EV/EBITDA a meaningless multiple for a bank?
Model answer
Two reasons. (1) Enterprise value is undefined: EV assumes you can split a company into an operating business plus a separate financing structure, but a bank's deposits and debt ARE the operating…
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More from FIG (Banks & Insurance)
- Why does a standard unlevered DCF fail when you point it at a bank?
- Why do bankers value financial institutions on equity value only, never enterprise value?
- What does it mean when people say 'debt is raw material, not capital structure' for a bank?
- Why are capex and working capital effectively undefined concepts for a bank?
- Why is interest expense an operating item for a bank when it's a financing item everywhere else?
- If revenue and EBITDA are out, what P&L lines do FIG analysts actually anchor on for a bank?
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