How do banks make money? A variety of business strategies

In this article, it is explained how deregulation and technological change have encouraged US commercial banks to become less like each other in virtually all aspects of their operations - including the generation of noninterest income - and how the resulting divergence in banking strategies has aff...

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Bibliographic Details
Published in:Economic perspectives (1977) 2004-12, Vol.28 (4), p.52
Main Authors: DeYoung, Robert, Rice, Tara
Format: Article
Language:English
Subjects:
Bank earnings
Banking
Banking industry
Company business management
Deregulation
Interest income
Management
Methods
Strategic planning (Business)
Studies
Technological change
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Summary:In this article, it is explained how deregulation and technological change have encouraged US commercial banks to become less like each other in virtually all aspects of their operations - including the generation of noninterest income - and how the resulting divergence in banking strategies has affected the financial performance of these companies. A variety of banking business strategies based on differences in product mix, funding sources, geographic focus, production techniques, and other dimensions, are defined, and the financial performance of established US banking companies that used these strategies from 1993 through 2003 are examined. A number of conclusions are drawn about how banks make money and how this may matter for the future of the banking industry.
ISSN:0164-0682
1048-115X
2163-3584