Answer to Question #155655 in Management for Prabhdeep

Question

How profitability is managed in banks?(Please Answer in 100 to 150 Words )

Answer 1

Banks make a large profit from the fees it charges for services and the interests on assets. However, high overhead costs and expenses come from the interests paid liabilities Profitability measures are either returns on investments and return on equity. Bank manages its profits by encouraging more individuals to gets loans upon which interests are charged. Deposits of the bank and the money it borrows from another bank or selling commercial papers in the money market. Banks maximize their profits through leverages.

Leverages form revenue sources when the banks lend out money to other financial institutions with a more substantial monetary base. For example, mortgage money usually has rates that include returns on assets issued out. The bank may lend out its share of the owner's cash or loaning out money from its depositors or using money raised by issuing bonds.