Question

Provide a breakdown of a banking institution's sources of revenue and categories of expenses.

Answer 1

Answer-Sources of revenue

The main source of revenue for banks are their loan,deposits of customers.Deposits at the bank for which the customers gets interest on that particular amount.Loans are also considered as the assets because banks gets interest in the future,which act as a source of revenue for banks.The other sources are:- Broker fees(sometimes bank act as a broker and get fees for performing the task on behalf of the customer),underwriting fees,profit on sale of trading assets.

Categories of expenses-

1.Variable expenses-Expenses that changes monthly(electricity,stationary )etc.

2.Fixed expenses-Expenses that remain constant from month to month for eg-rent etc.

3. Interest expenses - Expenses that are derived from deposits,short-term loans,long-term loans.Their are also known as operational expenses,as their incurred in the day to day working of the bank.

4.Non Interest expense-Expenses which are provision of credit losses.for eg -employees salaries, any rent or leasing, information technology costs,late payment etc.

---------‐-----------------------------------------------------------------------------------

Thanks