I sat with my 8 year old last week and laid out the terms of the new savings account she opened.
Dad’s bank is open now
I gave her a deposit rate of 1% per week very generously. In other words, a penny goes into the jar for every dollar she saves. And she left in a free toaster.
After explaining the conditions and dropping five pennies into the bottle with a $5 balance without missing a beat, she said, “Hmm… well… where do you get the bank?” that money? “
Great question.
There are really two answers to this question –
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Textbook answers
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Honest answer
The answer to the textbook is something to call Net interest income or Net interest margin.
This is the classic 3-6-3 that extends to lending and deposit rates. If you deposit money with me, I will give you 3% interest. After that, I lend money at 6% and pocket the 3% difference or net…interest…income. There are depreciations collected, deductions and amortization in the middle of amortization, but for standard deposit institutions, this is the main revenue generator taught in schools.
The honest answer is Sales and trading.
I asked the “intern” to create some numbers. In 2024, “banks” created a significant portion of their revenues from sales and trading desks.
Of course, Goldman majority of revenue from sales and transactions. This is mainly due to limited loan books. Without retail banks in every corner, Goldman’s net interest income is limited to commercial real estate (CRE) loans, asset management loans, private credit and several other business lines.
But JPMorgan, Citigroup, & Bank of America? Despite thousands of branches across the country, they still bring about the majority of revenue from desk trading and trading businesses.
jpmorgan chain On its own, it has a wealth of $3.31 trillion. Over 4,700 retail branches in the US. Over 15,000 ATMs nationwide, 18.5 million current accounts and 25 million debit card users. It requires 250,355 employees (as of 2016) and operates in more than 100 countries and increases its deposits to promote net interest income.
For comparison as of June 2025, Starbucks has 17,164 stores in the United States.
Still, 500 men in Manhattan skyscrapers bring 39% of their revenue.
So where does the bank get the money? It’s not a loan, not a customer, not an economy of scale, not even real estate (I’m watching McDonald’s). Approximately 500 people deal with stocks, FICC, derivatives and other securities products to generate cash flow and liquidity, pay these pennies in deposits and pay salaries to 200,000 other employees.
Are you interested in joining the Trader Papa Podcast in 2025? Shoot the email! I want you to sit for discussion
thought? question? comment?
Reach out! Maybe I’ll post the full topic or as a Q&A
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