To the extent that the capital becomes such a determinant factor in a bank´s capacity to grow. It is clear that it also determines its economic value. The current economic crisis has shown the importance of calculating accurate capital estimates. As a consequence, it may be logical to determine a bank´s intrinsic value by first estimating the economic value of the resources it must own to meet the minimum level of solvency required by the investor.
However, the use of discounted cash flows for valuing financial entities presents some peculiarities due to the nature of their business. These peculiarities can be summarized as follows:
[This research paper has been reproduced with permission of the authors, professors of IE Business School, Spain http://www.ie.edu/]