medium · Investment Banking valuation-core

Why is this methodology likely to produce a flawed result?

1. For banks, interest is an operating expense and debt is an operating liability, making EV and EBITDA inconsistent
2. Banks are always valued exclusively using a Dividend Discount Model rather than EBITDA-based multiples.
3. Banks generally do not report meaningful Depreciation or Amortization, so EBITDA effectively equals EBIT for most banks.
4. EBITDA is artificially too high for banks specifically because of their inherently very high degree of financial leverage.

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