Better management of determinants of profitability

10-19-2009, 01:02 PM

Allocative efficiency, to a greater extent, is associated profitability. Profitability in the bank is a function of several variables that may be called as the determinants of profitability. One of the determinants of profitability has been identified as deposits. The more the fixed deposits in a bank, the more loans the bank can give to a customer or an entrepreneur. rod aycox and the bank started by him have been able to offer loans of significant sums mainly due to the surging reserves due to the phenomenal deposits made by the common people.

The scale of business and thereby the profitability is a function of the quantum of deposits with the bank. These are the main sources of funds to the bank for the purpose of investment and making advances. Deposits imply additional cost to the banks because interest will have to be paid to the depositors. The service cost involved in time deposits is low but they are the most expensive. On the other hand the demand deposits are cheaper but their service cost is high.

So time deposits carry a high interest rate and put much pressure on profitability. But a bank can use them in high yielding investments because these deposits are more stable than that of others. But in general, higher the deposits, the higher should be the profitability provided that they are managed and utilized properly. Thus the deposits and their composition will have a strong bearing on the profitability of the bank.

Higher deposits are also an indication of the faith and confidence reposed in the banking operations of a bank. Banks with lower money reserves is an indicator of the health of that institution. Especially during crisis situations, banks have collapsed when their customers started withdrawing their deposits in panic. This has happened in almost all parts of the world. Sticking to the notion of profitability is a must to ensure continuity in customer relations. Only then will the confidence in a bank remain as such and not be shaken by the uncontrollable events in the financial market.

Tondtar · 10-19-2009, 01:20 PM

Hell Yeah!

Mu Mu · 10-19-2009, 01:49 PM

lol...class of 09! Whats your point?

MJC///M3 · 10-19-2009, 01:51 PM

xsb00st · 10-19-2009, 02:06 PM

Make it rain!

choicez · 10-19-2009, 02:18 PM

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Tondtar · 10-19-2009, 02:27 PM

Let's Roll

10-19-2009, 01:02 PM	#1
sinch Guest 0 Rep n/a Posts Drives:	Better management of determinants of profitability Allocative efficiency, to a greater extent, is associated profitability. Profitability in the bank is a function of several variables that may be called as the determinants of profitability. One of the determinants of profitability has been identified as deposits. The more the fixed deposits in a bank, the more loans the bank can give to a customer or an entrepreneur. rod aycox and the bank started by him have been able to offer loans of significant sums mainly due to the surging reserves due to the phenomenal deposits made by the common people. The scale of business and thereby the profitability is a function of the quantum of deposits with the bank. These are the main sources of funds to the bank for the purpose of investment and making advances. Deposits imply additional cost to the banks because interest will have to be paid to the depositors. The service cost involved in time deposits is low but they are the most expensive. On the other hand the demand deposits are cheaper but their service cost is high. So time deposits carry a high interest rate and put much pressure on profitability. But a bank can use them in high yielding investments because these deposits are more stable than that of others. But in general, higher the deposits, the higher should be the profitability provided that they are managed and utilized properly. Thus the deposits and their composition will have a strong bearing on the profitability of the bank. Higher deposits are also an indication of the faith and confidence reposed in the banking operations of a bank. Banks with lower money reserves is an indicator of the health of that institution. Especially during crisis situations, banks have collapsed when their customers started withdrawing their deposits in panic. This has happened in almost all parts of the world. Sticking to the notion of profitability is a must to ensure continuity in customer relations. Only then will the confidence in a bank remain as such and not be shaken by the uncontrollable events in the financial market.
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10-19-2009, 01:20 PM	#2
Tondtar 12 yr old Juvie 1076 Rep 881 Posts Drives: His Mom Crazy Join Date: Apr 2008 Location: El Lay iTrader: (2) Garage List 2008 (RIP in 2011) ... [0.00]	Hell Yeah!
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10-19-2009, 01:49 PM	#3
Mu Mu First Lieutenant 7 Rep 353 Posts Drives: BMW 330i Join Date: Oct 2008 Location: Johannesburg iTrader: (0)	lol...class of 09! Whats your point?
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10-19-2009, 01:51 PM	#4
MJC///M3 Colonel 87 Rep 2,324 Posts Drives: 09 SSII E92 M3 Join Date: Aug 2008 Location: Bronx, NYC iTrader: (0)	__________________ "You will get there, but it is up to you and you alone. It is what you are willing to do, and how you are willing to get there. You must be relentless, you must be tireless, you must pursue at all costs, so that you are ready, when the time is right." -Dad
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10-19-2009, 02:06 PM	#5
xsb00st Lieutenant Colonel 185 Rep 1,640 Posts Drives: Slow Join Date: Nov 2005 Location: Earth iTrader: (21)	Make it rain!
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10-19-2009, 02:18 PM	#6
choicez Major 264 Rep 1,124 Posts Drives: you mad Join Date: May 2009 Location: LA iTrader: (15)
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10-19-2009, 02:27 PM	#7
Tondtar 12 yr old Juvie 1076 Rep 881 Posts Drives: His Mom Crazy Join Date: Apr 2008 Location: El Lay iTrader: (2) Garage List 2008 (RIP in 2011) ... [0.00]	Let's Roll
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