question: How do major banks make money? Specifically profit.
comment: Using your (the customers) money the bank makes investments. These can be in the form of loans back to ‘small time’ customers, like your butcher getting a loan for £10000 and paying back £12500. That’s £2500 made from one ‘small’ customer. That can then be scaled up to Mortgages, they’re just super long term loans. The bank, knowing it has enough capital to serve its current needs, gives away its reserves and charges interest on the time that it is loaned. Thus making the bank richer over time... the premise is essentially scaled up to big business loans and trading on the markets... you have to speculate to accumulate and just *hope* you don’t lose. Because then 2008 happens all over again
passages: A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice. Traditionally, the most significant method is via charging interest on the capital it lends out to customers. The bank profits from the difference between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities.
   Here is a list of the largest deals in history in terms of value with participation from at least one bank:
  
  Section::::Regulation.
  
  Currently, commercial banks are regulated in most jurisdictions by government entities and require a special bank license to operate.
  
  Usually, the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's order – although money lending, by itself, is generally not included in the definition.
   Banks DIH also imports and distributes whiskey, vodka and other products from abroad.
  
  In 2011 the Banks DIH Group reported a group pre-tax profit of G$4.046B, a 31% increase over the previous year.
  
  The results were announced in January 2012 at the 56th Annual General Meeting, held at the Banks DIH Thirst Park in Georgetown.
  
  More than 1,000 shareholders attended the meeting.
  
  Section::::Recent events.
   Banks generally borrow the money they then lend to their customers. As they receive very low-interest loans from other firms, they may borrow as much as their customers require, while lending their capital to other borrowers at higher rates. If the card issuer charges 15% on money lent to users, and it costs 5% to borrow the money to lend, and the balance sits with the cardholder for a year, the issuer earns 10% on the loan. This 10% difference is the "net interest spread" and the 5% is the "interest expense".
   Non-bank institutions also frequently support investments in property and prepare feasibility, market or industry studies for companies. However they are typically not allowed to take deposits from the general public and have to find other means of funding their operations such as issuing debt instruments.
  
  NBFCs are not providing the cheque book nor saving account and current account. It only takes fixed deposit or time deposits.
  
  Section::::Role in financial system.:Growth.
   For example, a customer would usually pay interest to borrow from a bank, so they pay the bank an amount which is more than the amount they borrowed; or a customer may earn interest on their savings, and so they may withdraw more than they originally deposited. In the case of savings, the customer is the lender, and the bank plays the role of the borrower.
   In this respect, credit creation is the most significant function of commercial banks. While sanctioning a loan to a customer, they do not provide cash to the borrower. Instead, they open a deposit account from which the borrower can withdraw. In other words, while sanctioning a loan, they automatically create deposits.
  
  Section::::Role.:Primary functions.
  
  BULLET::::- Commercial banks accept various types of deposits from public especially from its clients, including saving account deposits, recurring account deposits, and fixed deposits. These deposits are returned whenever the customer demands it or after a certain time period.
   BULLET::::5. Asset liability mismatch/Maturity transformation – banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemption of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).
   Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers in the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as Automated Clearing House (ACH), Wire transfers or telegraphic transfer, EFTPOS, and automated teller machines (ATMs).
   BULLET::::- Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are very diversified groups that, among other services, also distribute insurance – hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.
  
  Section::::Types of banking.:Other types of banks.
   Public banks come in a variety of models. A public bank might be capitalized through an initial investment by the city or state, as well as through tax and fee revenue. A public bank, like a private bank, can take tax revenues and other government income as deposits, create money in the form of bank credit, and lend at very low interest rates. Where private banks are committed by their business model to take advantage of low interest rates by charging higher rates to borrowers, a public bank has no shareholders to pay, and so can pass the low rates onto borrowers such as public agencies, local businesses, residents, and students.
   Section::::Fee structure.
  
  Different banks charge their clients in different ways. There are banks that follow the transactional model where the client is not charged any advisory fee at all. The banks thrive totally on the commissions they get by distributing third party products. There are other private banks that follow a hybrid model. In this model, the bank charges a fixed fee for certain products and advisory fee for the rest. Some of the other banks are totally advisory driven and charge the clients a percentage of AUM (e.g. 0.75% of entire AUM).
   The sponsors of the conduit play two roles: manage assets and provide liquidity. Sponsor types range from large U.S. commercial banks to non-bank institutions, like mortgage lenders and asset managers. Large U.S. banks have long sponsored ABCP programs, some smaller U.S. banks sponsor a very modest share. Foreign banks sponsor a substantial share of ABCP, about 40 percent in 2007. Non-bank institutions, such as mortgage lenders, finance companies, or asset managers, also sponsor a considerable share of the market. Programs sponsored by non-bank institutions grew more dramatically than other programs from 2004 to 2007, more than doubling in assets to $400 billion.
   Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.
  
  Banks provide different payment services, and a bank account is considered indispensable by most businesses and individuals. Non-banks that provide payment services such as remittance companies are normally not considered as an adequate substitute for a bank account.
   Banks also provide a sampling of the private banking services at a lower price point than traditional private banking. These are called premium banking or priority banking services. They are meant for mass-affluent customers. The accounts do not generate as much revenue as traditional private banking, but given the number of customers, they amount to a sizeable revenue to the bank. The products offered to premium banking customers are the same as that for private banking customers with the exception that they do not include hedge funds or facilities to manage one's own business accounts. In short, it is wealth management at a much smaller scale.
   Market makers are broker-dealer institutions that quote a buy and sell price and facilitate transactions for financial assets. Such assets include equities, government and corporate debt, derivatives, and foreign currencies. After receiving an order, the market maker immediately sells from its inventory or makes a purchase to offset the loss in inventory. The differential between the buying and selling quotes, or the bid–offer spread, is how the market-maker makes a profit. A major contribution of the market makers is improving the liquidity of financial assets in the market.
  
  Section::::Types.:Specialized sectorial financiers.
   Banks, large and small, are traditional providers of commercial mortgages. According to the Federal Reserve, banks held $1.5 trillion of commercial mortgages on their books as of June 30, 2013.
  
  Section::::Providers of commercial mortgages.:Conduit lenders.
  
  Conduit lenders originate commercial mortgages and hold them as investments for a short period of time before securitizing the loans and selling CMBS secured by the underlying commercial mortgage loans. Conduit lenders include both banks and non-bank finance companies. Approximately $560 billion of commercial mortgages were held by issuers of CMBS as of June 30, 2013, according to the Federal Reserve.
   Private-sector banks in India
  
  The private sector banks in India are banks where the majority of the shares or equity are not held by the government but by private share holders.
   A bank is a business that is based almost entirely on financial transactions. In addition to acting as a lender for loans and mortgages, banks act as a borrower in a special type of loan called an account. The lender is known as a customer and gives unspecified amounts of money to the bank for unspecified amounts of time. The bank agrees to repay any amount in the account at any time and will pay small amounts of interest on the amount of money that the customer leaves in the account for a certain period of time. In addition, the bank guarantees that the money will not be stolen while it is in the account and will reimburse the customer 
   BULLET::::- Commercial banks provide loans and advances of various forms, including an overdraft facility, cash credit, bill discounting, money at call etc. They also give demand and term loans to all types of clients against proper security. They also act as trustees for wills of their customers etc.
  
  Section::::Regulations.
  
  In most countries commercial banks are heavily regulated and this is typically done by a country's central bank. They will impose a number of conditions on the banks that they regulate such as keeping bank reserves and to maintain minimum capital requirements.
  
  Section::::Services by product.
   The Bank offers its services through a network of branches, online, phone and mobile banking to personal customers (in Retail, Prestige and Private Banking segments), to sole traders and microbusinesses as well as medium and large companies in the Corporate Banking segment.
   Section::::Points of interest.
   In Europe, the banking segment is almost exclusively made up of commercial banks, while in the U.S. it is much more diverse and can involve commercial and investments banks, business development corporations or finance companies, and institutional investors such as asset managers, insurance companies and loan mutual funds and loan ETFs. As in Europe, commercial banks in the U.S. provide the vast majority of investment-grade loans. These are typically large revolving credits that back commercial paper or are used for general corporate purposes or, in some cases, acquisitions.
   By transferring the ownership of deposits from one party to another, banks can avoid using physical cash as a method of payment. Commercial bank deposits account for most of the money supply in use today. For example, if a bank in the United States makes a loan to a customer by depositing the loan proceeds in that customer's checking account, the bank typically records this event by debiting an asset account on the bank's books (called loans receivable or some similar name) and credits the deposit liability or checking account of the customer on the bank's books. From an economic standpoint, the bank has essentially created economic money (although not legal tender). The customer's checking account balance has no dollar bills in it, as a demand deposit account is simply a liability owed by the bank to its customer. In this way, commercial banks are allowed to increase the money supply (without printing currency, or legal tender).
   This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle. Fees and financial advice constitute a more stable revenue stream and banks have therefore placed more emphasis on these revenue lines to smooth their financial performance.
  
  In the past 20 years, American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions.
  