Creating a Revenue Model
February 12, 2025
In the previous few articles, we have already seen that sports sponsorships have been witnessing a significant rise in the recent past. We know that corporations have been shelling out billions of dollars in order to be able to sponsor prestigious sports occasions. This sharp rise in budgets is because corporations now view the sponsorship […]
The United States is economically the most powerful nation in the world today. This is what makes the study of central banking in the United States all the more interesting. Almost all other countries in the world adopted central banking without any major hassles. However, in the United States, a lot of conundrum took place […]
What Is Rework? Rework is that part of the final produce which has not been accepted by the client because it does not meet the required specifications. However, those specifications can be met by working on the item once again. Hence the name rework. What Is Spoilage? Spoilage is also that part of the final […]
The gender gap in pension systems around the world is a very real and pressing issue. Numerous studies have been conducted on this matter and almost all of them have concluded that the gender gap is a systematic problem that needs to be addressed by pension funds as well as by pension fund regulators across […]
The geographical boundaries drawn by nation states are blurring in the 21st century. In many parts of the world, free movement of goods, services, and even personnel have become a norm. However, strangely, the concept of credit and loans is still dependent upon national boundaries. The H1B visa system of America is a testimony to […]
Financial modeling generally does not differ very much from industry to industry. For instance, if a person creates a financial model for a retail company, it could also be used for a restaurant with some minor changes. This is because most of these companies sell products or services. This means that when they sell these products, value leaves the firm in the form of goods, whereas value is received by the company in the form of monetary compensation.
However, financial modeling for banks is a completely different activity. This is because banks make money with money. Both the outflow and inflow involve money. Banks take loans from customers in the form of deposits and then loan out the same funds to borrowers. This means that they essentially make money because there is a difference in the interest rate, which they charge from borrowers’ vis-a-vis what they pay to customers.
The nature of the banking business is profoundly different from other businesses. This has many implications from a financial modeling perspective as well. Some of these effects have been listed down below.
The bottom line is that financial modeling for banks is very different as compared to financial modeling for other companies. The key metrics which need to be paid attention to, also change. Also, unlike normal companies, there are a lot of regulatory factors which need to be considered in the model. The process for creating a banking financial model is also different as compared to other financial models.
Your email address will not be published. Required fields are marked *