If we're trying to value something like a house, it's important to think about what drives value. For example, you might look at the value of a property relative to its floor space, so the value per square foot. Reasonably, all other things being equal, a larger house should be worth more. Similarly, if we're trying to value a bank's equity it's important to think about what drives that value. In fact, it would be quite reasonable to assume that from a shareholder's perspective, if a bank generates more net income, it must be more valuable. So if we take the market capitalization and divide it by the net income, we get the dollar value per dollar of net income. All things being equal, if a bank generates more net income, it should be more valuable. What we're actually talking about here is the P/E ratio. Rather than pick up the market cap in total, we typically, pick up the share price. And so rather than pick up the net income in total, we typically pick up the net income divided by the number of shares, referred to as the earnings per share or EPS. So the P/E ratio is calculated by taking the share price and dividing it by the EPS. This is an example of an earnings multiple. It would also be common to look at the value of a bank by referring to its balance sheet. Here, we take the market capitalization of the bank and divide it by the book value of equity, rather than just grabbing equity from the bottom of the balance sheet, we typically tweak it slightly, by deducting any intangible assets, such as goodwill, and deferred tax assets.