Non-credit services Aggregate cost estimates for noncredit services are obtained by multiplying the unit cost of each service by the corresponding activity level. 目 Example: it costs $7 to facilitate a wire transfer and the customer authorizes eight such transfers,the total periodic wire transfer expense to the bank is $16 for that account. 目 These costs include the interest cost of financing the loan,loan administration costs,and risk expense associated with potential default. 行贺影小号
Non-credit services credit services Aggregate cost estimates for noncredit services are obtained by multiplying the unit cost of each service by the corresponding activity level. Example: it costs $7 to facilitate a wire transfer and the customer authorizes eight such transfers, the total periodic wire transfer expense to the bank is $16 for that account. These costs include the interest cost of financing the loan, loan administration costs, and risk expense associated with potential default
Credit services Cost of Funds ..the cost of funds estimate may be a bank's weighted marginal cost of pooled debt or its weighted marginal cost of capital at the time the loan was made. 目 Loan Administration ...loan administration expense is the cost of a loan's credit analysis and execution. 目 Default Risk Expense . the actual risk expense measure equals the historical default percentage for loans in that risk class times the outstanding loan balance. 行贺影小号
Credit services Credit services Cost of Funds …the cost of funds estimate may be a bank’s weighted marginal cost of pooled debt or its weighted marginal cost of capital at the time the loan was made. Loan Administration …loan administration expense is the cost of a loan’s credit analysis and execution. Default Risk Expense …the actual risk expense measure equals the historical default percentage for loans in that risk class times the outstanding loan balance
Commercial loan classification by risk category Historical Risk Default Class Characteristics Percentage Short-term working capital loans secured with 0.22% 1 accounts receivable and inventory Short-term real estate loans secured by facility and borrower's cash flow from total 0.61 2 operations Term plant and equipment loans secured by 1.3 3 physical plant and other real estate 4 Other loans 1.94 麓的贫香小手
Commercial loan classification by Commercial loan classification by risk category risk category Risk Class C haracteris tics Historical D efa ult P e rcent age 1 Shor t - t e r m w o r king capi tal l oans secur e d wit h accounts receivabl e and i nventor y 0.22% 2 Shor t - t e r m real estate l oans secur ed by facility and bor r o w e r’s cash flow fr o m t o t al oper a tions 0.61 3 Ter m plan t and equipment l oans secur ed by physical plant and other real estat e 1. 3 4 O ther l oans 1.94
Target profit The target profit is then based on a minimum required return to shareholders per account. Equity Targetreturn to Target profit= (Loan amount) Total assets shareholders 爸封强的黄香+孝
Target profit Target profit The target profit is then based on a minimum required return to shareholders per account. ( ) Loanamount shareholders Target return to Total assets Equity Targetprofit = ⎟ ⎟ ⎠ ⎞ ⎜ ⎜ ⎝ ⎛ ⎟ ⎠ ⎞ ⎜ ⎝ ⎛
Revenue components Banks generate three types of revenue from customer accounts: 1.investment income from the customer's deposit balance held at the bank 2.fee income from services 3.interest income on loans 麓的黄事+孝
Revenue components Revenue components Banks generate three types of revenue from customer accounts: 1. investment income from the customer’s deposit balance held at the bank 2. fee income from services 3. interest income on loans