To some of you this will be totally elementary,
but it’s still good to get a refresh.
Via a Deutsche Bank report, here’s a breakdown of bank revenues based on the industry average.
the biggest source of income is Net Interest Income.
Here’s Deutsche’s definition:
The largest component of a bank’s revenue is net interest income (NII)
– which accounts for about 65% of revenues on average.
NII is the dollar difference between the interest earned on a bank’s earning assets
(i.e. loans, securities and other interest earning investments)
and the funding cost of a bank’s liabilities
– which consists of deposits and borrowings.
NII is driven by volumes (i.e. assets) and spreads (net interest margin)