HOW DO BANKS MAKE MONEY BANKS INCOME PORTFOLIO

$$$ HOW DO BANK’S MAKE MONEY?

BANK’S INCOME PORTFOLIO A - Also called Interest Income B 1 Fund based Income Accepting Deposits and Lending Loans at Different Interest Rates A Deposit Account Services ( Safekeeping, checking, etc) Lending (Letters of Credit, Letters of Guarantees, etc) B 2 Bank’s income portfolio Fee Based Income C Trust Accounts (Wealth Management)

AN INSIGHT TO FEE BASED INCOME Deposit Account Services (on line bill pay, ATMS) 1 - Fee Generating Income – new production methods Investment Banking Securities Brokerage Merchant Banking 1 2 Lending (Securitization, Servicing) 2 - Cash Management 3 Fee Generating Activities – Non traditional 3

Investment banking…

INVESTMENT BANKING Front Office Middle Office 1 2 Investment Banking work is normally categorized into 3 segments Back Office 3

FRONT OFFICE SALES TRADING -Sales job is to call on institutional and HNI investors to suggest trading ideas and take orders -Sales desk then communicate clients’ orders to trading desks -They price and execute trades -They also facilitate structure new products that fit a specific need -Most profitable area -Responsible for majority of revenue -In the process of market making, traders buy and sell financial products -Golden rule followed by a trader ‘Buy Low Sell High’ -The goal of a trader is to make an incremental amount of money on each trade! -Reviews companies and writes reports Front Office requires highest caliber employees in terms of intellectual -Generates no revenues - But its resources are used to assist traders and capital and interpersonal skills. -Sales force in suggesting ideas to customers RESEARCH STRUCTURING -In recent years this relationship has become highly regulated -Relatively recent division -As derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much higher margins and returns than underlying cash securities

MIDDLE OFFICE Risk Management Analyze the risk traders are taking on to the balance sheet in conducting their daily trades Setting limits on the amount of capital that they are able to trade in order to prevent bad trades having a detrimental effect to a desk overall

BACK OFFICE -Operations involve data checking trades that have been conducted -Ensuring that they are not erroneous -Transacting the required transfers -Provides great job security -Involve most monotonous work at relative low pay

How can we facilitate banks make more money…

SKILL SPECIFIC CUSTOMER SPECIFIC MARKETING PLANNING Competitive price Selection Research and development Technology Quote speed Flexibility Product breadth Risk Management Settlement Any time / Any where facility Currency breadth Developing markets Liquidity management Relationship Innovation 24 x 7 desks Strategy advice and guidance Service at ‘door’ steps Integration with other markets

Simple ‘Mantra’ A Close the Gap with Other Global Markets B More End Points and Trading Venues C Facilitate Right Technology Decisions

Simple ‘Mantra’ continues… 1 Connectivity choices 2 Lower latency 3 Execution speed 4 High bandwidth capabilities 5 Flexibility 6 Easier ‘last mile’ access 7 Faster data feeds 8 Automated & Algorithmic trading 9 Higher messaging rates 10 Throughput optimization 11 Stable global infrastructure

Access to continuous stream of 1 global market data 2 messaging 3 news 4 history 5 analysis to ensure successful execution of trading strategies!

Present dilemma… 1 Quick connect with clients, brokers 2 Receive orders over financial extranets 3 Instant post or match orders 4 Respond in milliseconds 5 Increasingly nanoseconds