How much does a bank earn for each dollar on deposit?
How much does a bank earn for each dollar on deposit?
I'm putting this in "Personal Finance" because so often here we have situations where a bank provides poor service, makes an offer but doesn't follow through on it (bait and switch), or raises fees, and some RFDers transfer their $60,000 RSP from that institution to another. It hits the bank, but we don't know what that $60,000 is worth to the bank's bottom line. With this information, one could make a statement such as "the bank gambled by a sneaky fee hike of $15 per year, but they lost $xxx more than that on my account. I hope they're happy with their new business."
Here's a placebo accounting. For each dollar you have on deposit, the bank lends out seven dollars. After factoring in bad debts, salaries, branch building depreciation etc etc, the bank makes 1% on its loans. So in this hypothetical case, the bank would make 1% * 7 dollars = 7 cents for each dollar deposited. So permanently removing your $60,000 RSP would cost the bank .07 * $60,000 = $4,200 per year. I've guessed, oversimplified, and overstated by perhaps an order of magnitude, that's why I'd welcome comments from RFDers who have a handle on the real figures. TIA.
Another way of attacking the problem would be to divide the bank's profits by its deposits, but I'm guessing that banks do lots of profitable business that is not tied to deposits.
I'm putting this in "Personal Finance" because so often here we have situations where a bank provides poor service, makes an offer but doesn't follow through on it (bait and switch), or raises fees, and some RFDers transfer their $60,000 RSP from that institution to another. It hits the bank, but we don't know what that $60,000 is worth to the bank's bottom line. With this information, one could make a statement such as "the bank gambled by a sneaky fee hike of $15 per year, but they lost $xxx more than that on my account. I hope they're happy with their new business."
Here's a placebo accounting. For each dollar you have on deposit, the bank lends out seven dollars. After factoring in bad debts, salaries, branch building depreciation etc etc, the bank makes 1% on its loans. So in this hypothetical case, the bank would make 1% * 7 dollars = 7 cents for each dollar deposited. So permanently removing your $60,000 RSP would cost the bank .07 * $60,000 = $4,200 per year. I've guessed, oversimplified, and overstated by perhaps an order of magnitude, that's why I'd welcome comments from RFDers who have a handle on the real figures. TIA.
Another way of attacking the problem would be to divide the bank's profits by its deposits, but I'm guessing that banks do lots of profitable business that is not tied to deposits.