Unlevered DCF for Banks

This problem tests whether you understand how bank valuation differs from valuation of industrial companies. In a normal DCF, analysts try to isolate operating cash flows from financing effects, but for banks, interest income and interest expense are part of the core business model rather than separate operating and financing items. Interviewers ask this because FIG candidates need to recognize that the usual corporate finance toolkit does not always apply cleanly to financial institutions, and they want to see whether you understand the role of a bank’s balance sheet, its revenue drivers, and why alternative valuation methods are more appropriate.