From an economic point of view, banks carry out the crucial role of intermediat-
ing between individuals and/or organizations (corporations, financial institutions,
national and local governments, and non-profit entities) with financial surpluses
and those suffering from (temporary) money deficits. Such a definition is quite
general and falls short of fully representing the complexity and articulation of an
industry that is essential for economic development and national growth. When the
banking system does not work properly the costs for the economy may be severe
as the last financial crisis has made painfully clear. To sketch the main features of
the banking business, we will segment the industry into a few categories in order
to identify the different business models’ economics, profitability drivers, and,
eventually, valuation metrics. Nevertheless, it’s worth underlining that, as Paul
Volcker,1 former Federal Reserve Chairman used to say, fiduciary responsibility is
at the very core of every banking organization, regardless of the specific activities
carried out.
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