If you came here looking for bank FCF
Close this calculator. The standard formula will produce a number, but that number tells you nothing about a bank's capacity to return capital.
What the bank cash flow statement actually shows
Net loans extended and net deposits taken are presented in operating activities for banks. The OCF line is dominated by balance-sheet movements, not by trading margin. ASC 230[ASC 230]permits this presentation; it does not make the resulting FCF figure useful for valuation.
What to use instead
- Return on tangible equity (RoTE) for profitability.
- Dividend discount model for valuation, because dividend capacity is the regulated cash distribution.
- Residual income for assessing whether the bank earns above cost of equity.
- SR 21-14 supervisory guidance[Fed SR 21-14] for capital-distribution constraints.
Why CapEx is not a useful denominator
Banks deploy capital via regulatory-capital requirements, not via PP&E. CET1 and total-loss-absorbing-capacity ratios are the binding constraints. CapEx for a bank is small (branches and technology); subtracting it from OCF leaves the balance-sheet mechanics intact.