CHART OF THE DAY: How A Bank Makes Money

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To some of you this will be totally elementary, but it’s still good to get a refresh.

Via a Deutsche Bank report, here’s a breakdown of bank revenues based on the industry average.

Obviously, the biggest source of income is Net Interest Income.

Here’s Deutsche’s definition:

The largest component of a bank’s revenue is net interest income (NII)—which accounts for about 65% of revenues on average. NII is the dollar difference between the interest earned on a bank’s earning assets (i.e. loans, securities and other interest earning investments) and the funding cost of a bank’s liabilities—which consists of deposits and borrowings. NII is driven by volumes (i.e. assets) and spreads (net interest margin).

chart of the day, bank revenue breakdown, may 2011