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No. of Recommendations: 4
To coastal,

How will banks make money?

Well several ways.

1) Net interest income will still provide some revenue. Spreads or the NIM (net interest margin) will no doubt be compressed, but not eliminated. Banks will start paying next to nothing for deposits, some already are.

2) During the GFC, revenues on the deposit side crew significantly, mostly from the advent of debit cards. NSF fees are a major revenue source from the deposit side and there are other smaller sources. Even for 2019 the percent of revenues of most banks from the deposit had are greater than back in 2006/2007.

3) Larger banks have additional sources of income some considerable. That is one reason that I most recently bought BK as it is a bank focused on a customer base of the wealthy and the investment industry. It has a lot of fee revenue. Its largest revenue source is related to securities at $11.2 billion versus NIM of $3.2 billion. Making loans and holding bonds is a smaller part of BK than any other bank that I know of. While I believe that COVID will affect all businesses to some degree, BK will not be effected that much by either low interest rates or credit losses. Now security losses could be more problematic.


I owned JPM from 3/2008 to 1/2020. It is a good bank overseen by possibly the best banker today - Jamie Dimon. I think that is a well known fact and fully reflected in the price. When I sold JPM, I also owned BAC & C. They had all appreciated nicely, but JPM was selling at a premium to the other two and I figured better to sell before the market started to start guessing about how much longer Dimon would stick around.
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