Many people have such a stereotype that all banks are very rich and the owners' money grows exponentially. But still, to confirm or expose this statement, it is worthwhile to understand the income and expenses of commercial banks.
What makes up the income and expenses of banks
The bank's income includes deposits of residents of the country, interest on loans returned, dividends on shares of companies in which it is listed as shareholders.
Banks' expenses imply the accrual of interest on deposits, the issuance of consumer and other loans, the maintenance of the efficiency of all branches, the payment of salaries to employees. It should be noted that most of the branches of commercial banks are self-sufficient, i.e. the branch's income should be enough to pay people, utility bills, rent and other expenses. If the branch is strategically important but unprofitable, money to keep the work going comes from the main branch.
How banks work
The structure of banks' work assumes a constant circulation of funds. The policy of increasing funds in the organization is based on the investment and reinvestment of incoming funds.
Banks are very happy to issue loans to legal entities, as well as mortgage and ordinary consumer loans. Provided that about 20% of the funds are not returned, the interest on the returned is enough to pay off losses and ensure profit.
Commercial banks have their own staff of analysts and traders who help to invest money in securities of other organizations, on which in the future you can receive dividends, and after some time even sell at a profit.
It is also known that banks often open various chain stores in the territory of the country; the sale of electronics, groceries and other essential goods is especially popular.
All these actions are carried out in order to make a profit and provide interest on people's deposits. That is, in the management of the bank there should be people who will be able to organize work and who know how to invest money in order to get a good profit.
