How Do You Value a Bank or Insurance Company?

You can't use FCFF for a bank. A bank's "debt" (deposits, borrowings) is its raw material — the deposits are what it uses to generate loans. Separating debt from operations is impossible. Instead, we value banks at the equity level directly.

For banks: use DDM, FCFE, or P/BV analysis. The key driver is ROE vs cost of equity (ke). If ROE > ke, the bank creates value and deserves to trade above book value (P/BV > 1). If ROE < ke, it destroys value (P/BV < 1).