EV formula for banks
Hi guys. Need to ask this question as it came up during my last AC and didn't know the answer myself, although thankfully it wasn't me who was asked. In the general EV formula, we take the sum of market cap and market value of debt and subtract cash (also add preferred shares & minority interest). From what I understand, cash is subtracted because it's a non-operating asset and can be used to bring the EV down via paying off debt. However, could the same be said about banks? Cash is an essential part of operations in banks and is used primarily to fund operations like loans. So would we still subtract cash in the case of a bank?
Sorry if it sounds dumb. I'm pretty well aware that banks have their deposits already in liabilities and loans in assets. Would it be wrong then to assume that a bank can opt to use its cash for such operations?
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