Ch_04_Non_Int_inc

Ch_04_Non_Int_inc - Managing Non-Interest Income &...

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Managing Non-Interest Income & Non-Interest Expense 11
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Issues in Interest Income & n Deregulation in the 1990s lead to an increase in competition and a decrease in NIM. n NIM is inversely related to bank size. 22
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Issues in Interest Income and n Core deposit growth has slowed n Disintermediation n Relative loan yields have fallen due n Increased competition for loans n Refinance “option” n Result is lower NIM n Banks must increase non-interest income (relative to non-interest expense) to grow profits 33
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Non-Interest Income n Sources of Non-Interest Income n Fiduciary Activities n Deposit Service Charges n Trading Revenue n Investment Banking/Brokerage Activities n Insurance Commissions n Net Servicing Fees n Net Gains/Losses on Loan Sales n Other Net Gains/Losses and Other 55
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Non-Interest Income n All fees are NOT created equal n Some fees are stable and predictable over time, while others are highly volatile because they are cyclical n Non-Interest Income has increased as a proportion of net operating revenue n Largest contributors are deposit service charges and other non-interest income n Larger banks rely more on non-interest 77
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Non-Interest Income n Deposit Service Fees n Stable source of revenue n Relatively price inelastic n Large banks tend to charge more for these services than small banks 99
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Ch_04_Non_Int_inc - Managing Non-Interest Income &...

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