How do banks generate income?

[Issa56]

How do they make money?
* mortgage - using some billionaires account to buy housing properties and leasing them
* estate and lands with same patterns
* SMS alert charges
* Transfer charges
* Syphons dormant accounts or dead people accounts that are inactive with enough money in it.
* ATM and investment cards
* sales of currencies like dollar to naira
* preparation of international documents
* savings people's valuables like gold, certificate, court documents, WILLS, and so on.

I know banks give loans to company or people that need loan to grow their businesses with high interest, I know that's another way which banks use to get money, when they are giving loans, their interest rate is crazily high. Also  their are some little amounts that banks deduct from customers accounts that some customers won't even notice, but if those amounts are combined together, you will see that it's a huge amount of money, that's another way that banks are using to steal customers money and they are using that to increase their own wealth. Their are lot's of illegal ways which banks are using to steal from their customers

[S A KHAIR]

Banks generate income through different product and services like one of the primary ways is by lending money to customers at a higher interest rate than the rate at which they borrow money from other banks or the central bank. The difference in interest rates, known as interest rate spread allows banks to earn a profit on the loans they make. Banks also charge fees for various services such as account maintenance, ATM usage and wire transfer. Banks may invest their own funds in various financial instruments such as stocks, bonds and real estate to earn a profit on their investment. Some banks generate income by providing advisory services to clients or by offering insurance products.

Number one of their income is obviously lending  it could be lending to other bank like credit suisse case or lent to other people, a company or government project or lend their money to the government bond. the point is they generated money from lending. and that is pretty much 90% i think 

It can be said that the biggest profit of banks is from their lending sector. But what's wrong with that? Many people say that the bank is taking our money when we deposit money. That's true but it's the art of business, and if we don't like it, we don't have to trust them and no one is forcing us to give them money. Like many people on this forum are also making profit through lending.

[dansus021]

Number one of their income is obviously lending   it could be lending to other bank like credit suisse case or lent to other people, a company or government project or lend their money to the government bond. the point is they generated money from lending. and that is pretty much 90% i think  

Another things is through transactions, you are not giving the service for free. But biggest source indeed is through lending or loan (in my area). It allows the bank to make their funds revolve around their users with monetary interest. It is the nature of centralization which made this possible and if we would compare it from this technology then there's a huge difference with how money flows. As we all know, banks have plenty of users which is considered aspect of bank. In this industry as well but centralization and decentralization are far from one another. As ive read in the replies, banks has the weath and all but due to centralization, they are also liable withnegative tendencies such as losses.

Right, even in my country lending might be the fuel for banks and it might happen to other developing countries. I also watched some youtube channel that discussed about curent bank collapse the SVB bank and they showed the basic of the bank too - https://www.youtube.com/watch?v=E_VKZ6dzauo

It can be said that the biggest profit of banks is from their lending sector. But what's wrong with that? Many people say that the bank is taking our money when we deposit money. That's true but it's the art of business, and if we don't like it, we don't have to trust them and no one is forcing us to give them money. Like many people on this forum are also making profit through lending.

Nothing wrong with that the OP asked how do bank generate income and most people here answered it, the things it would be wrong if the bank used all of our money and goes bankrupt 

[Lorence.xD]

Banks generate income through different product and services like one of the primary ways is by lending money to customers at a higher interest rate than the rate at which they borrow money from other banks or the central bank. The difference in interest rates, known as interest rate spread allows banks to earn a profit on the loans they make. Banks also charge fees for various services such as account maintenance, ATM usage and wire transfer. Banks may invest their own funds in various financial instruments such as stocks, bonds and real estate to earn a profit on their investment. Some banks generate income by providing advisory services to clients or by offering insurance products.

Number one of their income is obviously lending  it could be lending to other bank like credit suisse case or lent to other people, a company or government project or lend their money to the government bond. the point is they generated money from lending. and that is pretty much 90% i think 

Another things is through transactions, you are not giving the service for free. But biggest source indeed is through lending or loan (in my area). It allows the bank to make their funds revolve around their users with monetary interest. It is the nature of centralization which made this possible and if we would compare it from this technology then there's a huge difference with how money flows. As we all know, banks have plenty of users which is considered aspect of bank. In this industry as well but centralization and decentralization are far from one another. As ive read in the replies, banks has the weath and all but due to centralization, they are also liable withnegative tendencies such as losses.

The interest they give to every loan is somwtimes actually high that it really gives them a big time profit and earning. Imagine not paying in time would give you an extra payment? That's how they generate money plus I don't know if some bank literally have connections in each other because if you use other bank's atm it will cost you too much fee since the bank you have is not available in some places so you have no choices but to use other bank that will cost you too much transactions fee from my experience. This is centralized work that's why most of the people prefer to use decentralized system.

[irhact]

The interest they give to every loan is sometimes actually high that it really gives them a big time profit and earning. Imagine not paying in time would give you an extra payment? That's how they generate money plus I don't know if some bank literally have connections in each other because if you use other bank's atm it will cost you too much fee since the bank you have is not available in some places so you have no choices but to use other bank that will cost you too much transactions fee from my experience. This is centralized work that's why most of the people prefer to use decentralized system.

I think banks does this on purpose so they can benefit from the extra charges they get for using other ATM that isn't theirs. Sometimes the banks will claim they don't have money in their ATM so you can make use of other banks ATM then they charge you for that transaction. Banks has multiple ways of making money from their customers. They can also make money through maintenance chargers.

Some banks charge when you make deposits and also withdrawals, the banks are scamming us and that's why bitcoin is better because we don't have all this changers expect miners fees but it's not as much as bank charges unless when the network is congested.

[19Nov16]

As we know that banks are a business that promises big profits, banks collect money from consumers from savings to deposits, when banks get customers who want to save in the form of deposits, banks can freely rotate money, they give low interest to customers and apply interest high at least 2x so that banks get a lot of profit.

[xSkylarx]

As we know that banks are a business that promises big profits, banks collect money from consumers from savings to deposits, when banks get customers who want to save in the form of deposits, banks can freely rotate money, they give low interest to customers and apply interest high at least 2x so that banks get a lot of profit.

Also, don't forget the fees. There are a ton of fees that we are paying to them, but mostly they are on interest, as when we talk about banks, we always think about loans and also interest, which we know is only a small amount, but still, there are a ton of people getting loans from them and also investors in them. Also, there are banks where farmers can easily loan their land, which also has interest, and other farmers can't pay it back, which would become property of the bank, and we are talking about land that is hectares big.

[Sayeds56]

The mortgages,  insurance scams and interest rates from loans are the main source of income for bank plus they charge fees for everything you do in bank so that's why they are rich and they know how to get money from customers .

It is correct that main source of income for banks is from loans and mortgages, they provide to individuals and businesses, but I think it is not correct all banks are  involved in fraudulent or scams activities.While it is true that there have been some cases of unethical behavior by some financial institutions in the past that doesn't represent the entire industry. The banks all over the world operate within the regulatory framework of central bank and the role of central bank is to make sure that they adhere to the regulations and safeguard the interests of customers.

[bluebit25]

As we know that banks are a business that promises big profits, banks collect money from consumers from savings to deposits, when banks get customers who want to save in the form of deposits, banks can freely rotate money, they give low interest to customers and apply interest high at least 2x so that banks get a lot of profit.

The game of its owners must have a clear difference, sometimes looking at the profit as well as the risk that the bank may encounter during its existence, we can understand the reason. Some problems today when money becomes a tool to govern everything and the operation of the bank gives them many different voices, over time it will have to change the way it works ike to think is also inevitable. But the different profits that the bank earns also accompanies the development and change of people, from ancient times to the present the value of money always needs its own standards, so does the banking system exist in different concepts.

[yohananaomi]

As we know that banks are a business that promises big profits, banks collect money from consumers from savings to deposits, when banks get customers who want to save in the form of deposits, banks can freely rotate money, they give low interest to customers and apply interest high at least 2x so that banks get a lot of profit.

agree, it is clear that the profits received from the bank are very large by using customer funds to rotate and lend to those in need, where the interest set for the borrower is greater than giving interest to customers.
but that is the compensation that is obtained from the movement of banks and it is natural that banking products are very profitable and interrelated and need each other between savers and borrowers by using banking facilitation.

[mirakal]

Bank is an establishment known for financial services but what they do these days is way more than that. And the things they do are both legal and illegal, still, they cover up under the guise of the legality that covers the sector.

Mind you, you forgot to add that;

1. They launder money.
2. They broker onshore and offshore deals (both legally and illegally).

4. They blackmail their customers and steal the money of the faint in heart.
    And many more...

There is a lot that will always make me sceptical of banks.

This is not true. It's a serious accusation you've made here. I was once a bank employee in my life, and I know that bank is not involved in the illegal activities you mentioned. Do you think the regulators of the bank, particularly the central bank, would tolerate this? They would not, and if they discover any serious violations, they would promptly close the bank. Banks that deceive their customers have no right to operate a business built on trust.

As we know that banks are a business that promises big profits, banks collect money from consumers from savings to deposits, when banks get customers who want to save in the form of deposits, banks can freely rotate money, they give low interest to customers and apply interest high at least 2x so that banks get a lot of profit.

So how do banks promises big profits?

[blockman]

agree, it is clear that the profits received from the bank are very large by using customer funds to rotate and lend to those in need, where the interest set for the borrower is greater than giving interest to customers.
but that is the compensation that is obtained from the movement of banks and it is natural that banking products are very profitable and interrelated and need each other between savers and borrowers by using banking facilitation.

That is how banks make money and that's why more and more profits are coming into them because they're good at spreading investments and making the most of it from people's funds. Everyone needs to understand that it is the business model of the banks, if you don't like to earn a little percentage of your money from them then you shouldn't keep it with them and instead, you should make your own business from your own money or investments as well.

[EarnOnVictor]

Bank is an establishment known for financial services but what they do these days is way more than that. And the things they do are both legal and illegal, still, they cover up under the guise of the legality that covers the sector.

Mind you, you forgot to add that;

1. They launder money.
2. They broker onshore and offshore deals (both legally and illegally).

4. They blackmail their customers and steal the money of the faint in heart.
    And many more...

There is a lot that will always make me sceptical of banks.

This is not true. It's a serious accusation you've made here. I was once a bank employee in my life, and I know that bank is not involved in the illegal activities you mentioned. Do you think the regulators of the bank, particularly the central bank, would tolerate this? They would not, and if they discover any serious violations, they would promptly close the bank. Banks that deceive their customers have no right to operate a business built on trust.

Thanks for letting me know your opinion, but I must tell you that I also resigned from a bank in 2014 for me to pursue a better goal, so I have experience also. What I iterated above are clearly not the obvious ways of generating money by banks, but I'm afraid that it is with it and its top employees and owners, these people are corrupt, only that they are cleverly doing it.

You might not know, but they do these and they do it cleverly to the extent that the CBN might not know, or connive with them for their own cut. Even if the auditors detected at times, they know how they settle their ways.

Try to investigate this online and you will be surprised by the bank frauds you would realize.

[NotATether]

As we know that banks are a business that promises big profits, banks collect money from consumers from savings to deposits, when banks get customers who want to save in the form of deposits, banks can freely rotate money, they give low interest to customers and apply interest high at least 2x so that banks get a lot of profit.

Thanks for letting me know your opinion, but I must tell you that I also resigned from a bank in 2014 for me to pursue a better goal, so I have experience also. What I iterated above are clearly not the obvious ways of generating money by banks, but I'm afraid that it is with it and its top employees and owners, these people are corrupt, only that they are cleverly doing it.

You might not know, but they do these and they do it cleverly to the extent that the CBN might not know, or connive with them for their own cut. Even if the auditors detected at times, they know how they settle their ways.

Try to investigate this online and you will be surprised by the bank frauds you would realize.

The big US banks such as Wells Fargo, JPMorgan Chase, Citi, have all at once point or another doing shady stuff or laundering money for others, before getting caught and being made to pay comparably small (for a bank) fines by the department of justice.

But I think banks mostly make their money off of interest rates, no? I mean, when you open a credit card, which is all too common nowadays, you are literally getting a monthly loan for the amount you spend and you have to pay that off at the end of the month, else the APR gets higher.

[mirakal]

Try to investigate this online and you will be surprised by the bank frauds you would realize.

Can you cite an example of other banks regarding your accusation of illegal practices in banks? It would be better if you could provide evidence yourself to support your statement instead of suggesting that we search for bank frauds.

Mind you, you forgot to add that;

1. They launder money.
2. They broker onshore and offshore deals (both legally and illegally).
3. They steal money from customers' accounts through double and unexplainable charges.
4. They blackmail their customers and steal the money of the faint in heart.
    And many more...

I'm referring to this accusations.

3. They steal money from customers' accounts through double and unexplainable charges.

This one alone is impossible as bank account holders are not stupid, they would know if there are unauthorized transactions charge to their bank accounts.

[lunnatic]

As we know that banks are a business that promises big profits, banks collect money from consumers from savings to deposits, when banks get customers who want to save in the form of deposits, banks can freely rotate money, they give low interest to customers and apply interest high at least 2x so that banks get a lot of profit.

agree, it is clear that the profits received from the bank are very large by using customer funds to rotate and lend to those in need, where the interest set for the borrower is greater than giving interest to customers.
but that is the compensation that is obtained from the movement of banks and it is natural that banking products are very profitable and interrelated and need each other between savers and borrowers by using banking facilitation.

It's true that this is indeed a scheme from the bank, they use customer funds to generate profits,
the more customers, the more the bank generates profits,
something like that is actually a reciprocal and that's good.

[smile1218]

Banks have different kind of services that create income for them. Interest income is the primary way that banks generates income. Banks lend money to borrowers at a higher interest rate than they pay on deposits, generating a profit margin. This is known as the interest margin. Banks also. earn interest income by investing in securities such as government bonds or corporate debt. Fees is another source of income of banks. Banks charges fees for a variety of services such as account maintenance, overdraft protection, and wire transfers. Credit card companies also charge merchants a fee for processing transactions, which is shared with the issuing bank. Banks also generate income through investment gains.  Banks generate income through a combination of interest income, fees, investment gains and other activities. The specific mix of revenue sources depends on the banks business model and strategy.

[Davian144]

agree, it is clear that the profits received from the bank are very large by using customer funds to rotate and lend to those in need, where the interest set for the borrower is greater than giving interest to customers.
but that is the compensation that is obtained from the movement of banks and it is natural that banking products are very profitable and interrelated and need each other between savers and borrowers by using banking facilitation.

Banking services have indeed been made that way for a long time so this should not be an issue in my opinion. Because some people don't want the bank to make a profit through the money they save, they definitely won't put their money in the bank. But what we see now is that almost everyone wants to save money in a bank when the bank can guarantee its security for everyone. So I think it's only natural that the bank takes advantage of this.

It's true that this is indeed a scheme from the bank, they use customer funds to generate profits,
the more customers, the more the bank generates profits,
something like that is actually a reciprocal and that's good.

Reciprocity in terms of mutual benefit is indeed good, but in that case the bank's customers only benefit from the security sector in saving money, while the bank can do more than that because they can get another profit in the form of money through the circulation of money deposited by customers to them and I think that it is also very reasonable for the bank to do because basically they also take care of the money of everyone who has become their customer.

[EarnOnVictor]

Try to investigate this online and you will be surprised by the bank frauds you would realize.

Can you cite an example of other banks regarding your accusation of illegal practices in banks? It would be better if you could provide evidence yourself to support your statement instead of suggesting that we search for bank frauds.

Mind you, you forgot to add that;

1. They launder money.
2. They broker onshore and offshore deals (both legally and illegally).
3. They steal money from customers' accounts through double and unexplainable charges.
4. They blackmail their customers and steal the money of the faint in heart.
    And many more...

I'm referring to this accusations.

3. They steal money from customers' accounts through double and unexplainable charges.

This one alone is impossible as bank account holders are not stupid, they would know if there are unauthorized transactions charge to their bank accounts.

Try to investigate this online and you will be surprised by the bank frauds you would realize.

Can you cite an example of other banks regarding your accusation of illegal practices in banks? It would be better if you could provide evidence yourself to support your statement instead of suggesting that we search for bank frauds.

Mind you, you forgot to add that;

1. They launder money.
2. They broker onshore and offshore deals (both legally and illegally).
3. They steal money from customers' accounts through double and unexplainable charges.
4. They blackmail their customers and steal the money of the faint in heart.
    And many more...

I'm referring to this accusations.

3. They steal money from customers' accounts through double and unexplainable charges.

This one alone is impossible as bank account holders are not stupid, they would know if there are unauthorized transactions charge to their bank accounts.

I don't know the country you are my friend, but this often happens in my country despite the strict regulation in the banking industry. And I have read that CBN had sanctioned banks several times for this, that's for those who complained, so it happens. The percentage of those that do not complain is larger, this is because the amount charged is insignificant most times, but this is a substantial amount for the banks when you sum it up over time.

Personally, I am a victim of this many times so I didn't form it. And I say this without any apology, at least three banks namely, Ecobank, Acess Bank and FCMB have charged me in either an unexplainable way or dubiously.

Now, let me take it one after the other by the bank and I will use USD for conversion clarity.

1. I left Ecobank because it charged me some persistent unexplainable small amounts, and this happened until the time they charged me about $4 which they can't explain. When I complained it took the operation manager about 1 hour to restore it back and he confessed to me that he didn't even know the reason they charged me. But to my surprise again, they removed another $4 the next day. So, I left the bank.

2. As for FCMB, there is no time I keep money there that I meet the money intact. If I keep about $1000 there, I can be sure to meet $999.90 the next time I check it even without making any transaction. This was regular for years before, and the most annoying thing is that the charges don't reflect on my statement as charged for anything.

3. Access Bank was the worst, aside from regularly deducting unexplainable charges on an account I abandoned with them for years, they still went ahead to issue a debit card and charged me on an account that has been dormant for over 13 years.

The big US banks such as Wells Fargo, JPMorgan Chase, Citi, have all at once point or another doing shady stuff or laundering money for others, before getting caught and being made to pay comparably small (for a bank) fines by the department of justice.

But I think banks mostly make their money off of interest rates, no? I mean, when you open a credit card, which is all too common nowadays, you are literally getting a monthly loan for the amount you spend and you have to pay that off at the end of the month, else the APR gets higher.

Thank you for this. I also know there are ways they still make money genuinely but was just referring to other shady deals that enrich banks.

[Argoo]

As we know that banks are a business that promises big profits, banks collect money from consumers from savings to deposits, when banks get customers who want to save in the form of deposits, banks can freely rotate money, they give low interest to customers and apply interest high at least 2x so that banks get a lot of profit.

As a rule, banks provide their loans secured by real estate or movable property such as cars. At the same time, the appraised property is significantly underestimated in its value, and if the client for some reason could not repay the debt, then the property is sold by the bank or the bank retains it. At the same time, the profit from such a sale is much higher than the collection of ordinary interest for using a loan.
In addition, significant profits for banks bring the collection of penalties for delay in using the loan.