Summary
Samenvatting Bank management
- Course
- Institution
Sv bank management (master finance and risk management) business sciences.
[Show more]
Seller
Follow
1234xx
Reviews received
Content preview
LES 1: WHAT ARE BANKS?Save our money
• Store of wealth (savings accounts)
Use our money
• Payment methods (checking account, debit/credit card, Bancontact, mobile banking, currency
exchange,…)
Get loans
• Mortgage, personal loan, car loan, student loan, business loan,…
Invest
Via bank or
• Term accounts, bonds, equities, pension saving, funds,… associated
entity
Insurance
• Car insurance, life insurance, family insurance, travel insurance,…
BANK BALANCE SHEET
Banks (and other financial institutions) have a different asset and liability structure compared to other firms
• Funded by financial liabilities:
o Deposits
o Bonds
o Subordinated debt
o (Equity capital)
• Assets are also mainly financial:
o Cash
o Loans
o Securities
o Fixed assets
1
,FIXED ASSETS
Branch network
• Brick and mortar
• Role used to attract new clients, wire transfer money
• Less necessary due to internet banking
• More based on giving advice (e.g. mortgages)
• In combination with fixed high costs, banks are closing down branches
LOANS
• Mortgages
• Consumer credit
• Business loans
• Credit lines
• Interbank loans
• (local) government loans
SECURITIES
Some very liquid and not so risky
• Treasury notes (< 10 years)
• Treasury bonds (> 10 years)
Some more risky, but also higher return
• Corporate bonds
• Equities
• Trading assets
LIABILITIES
Main source of funding are deposits
• Sight deposits
o No interest rates, demandable on sight
• Saving deposits
o Low interest rates, demandable
• Term deposits
o (Generally) higher interest rates, fixed term
• Wholesale/corporate deposits
• Interbank deposits
EQUITY
Banks typically have less equity compared to other firms
• Share capital
2
, • Retained earning
• (Subordinated debt)
The equity buffer is quite small for banks (around 5-6%)
• Defense against non-performing assets
• Regulation (Basel III) mainly concerned with maintaining high enough equity buffers
• Will be a major part of this course
BANK INCOME STATEMENT
Income is derived from:
• Lending
• Investing in other financial assets yielding a return
• Providing services
Expenses:
• Funding costs (deposits and non-deposit liabilities)
• Personnel costs
• Costs of running branch network
• Etc.
INCOME STATEMENT
3
, DECOMPOSING INCOME
Net interest income is the largest part of total income
Other types of income: trading, insurance activities, fee income (e.g. private banking, wealth management)
Costs: operational (personnel), reserves (for bad loans)
WHAT DIFFERENT TYPES OF BANKS ARE THERE?
TYPES OF BANKS
Depending on which business/funding is dominant, Fls can be divided into different business models. Saunders
and Cornett define a few:
• Depository institutions
o High proportion of funding from (retail) deposits, and main source of income real estate
loans
o Commercial banks, savings banks, credit unions
• Finance companies
o Do not accept deposits, but rely on short- and long-term debt as source of funds
o Often give more risky (personal) loans
• Securities firms
o Investment banks (originate, underwrite, distribute new securities)
o Brokerage firms (purchase, sale of existing securities)
TYPES OF BANK
Retail bank
• Consumer deposits, consumer loans, mortgages, small business loans
Wholesale bank (corporate bank)
• Deposits/loans to large companies, governments, pension funds, etc.
Investment bank/brokerage
• Fee/commission generating business (asset management,
M&A, trading)
Universal bank
• Offer all of the above (one-stop-shopping)
4
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller 1234xx. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.36. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79976 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now