Bank turnover refers to the amount of revenue a bank generates over a given period of time. Financial periods can include weeks and months, but revenue reports are usually reported every three months, known as quarterly, or at the end of the bank’s financial year. While turnover usually refers to the amount of money brought into the bank, it can also refer to staff, customer and asset turnovers.
There are four main ways for a bank to generate income. These methods of bank turnover are interest, fees, investments and sales. Interest is raised off loans and mortgages. In theory, the bank loans a specific amount to a person or business with an agreed rate of return or interest. The person pays back more than he or she borrowed and the bank receives a profit.
Fees can represent a small amount of income for the bank. This said, there are often a lot of small fees paid by customers and sometimes by non-customers. When customers with certain accounts go into a negative amount of money, the bank charges fees and interest. Such interest is often reduced if the customer has an overdraft arrangement.
Banks also raise fees from those who take out credit cards and especially those who do not pay the balance back on time. Banks in many countries charge users to use their cash machines or automated teller machines (ATMs). They also charge larger fees to people who use rival banks and to rival bank customers who use their ATMs.
Investment provides the largest amount of revenue for a bank. It is also the most complicated and hardest to regulate area of banking activity. Handled by the investment arm of a bank, investment involves calculated risks in the world’s stock market. Banks take money that is put in by customers and holds it for a number of days — this is why checks and deposits do not clear instantly —, and they invest the money to make a short- or long-term profit.
Sales money in terms of bank turnover comes from the sales of assets and properties. If a bank forecloses a person’s home in America, it is able to regain some or all of the mortgage money by selling the house to someone else. Banks can sell their own properties, shares in other companies and assets such as gold, in order to raise more revenue and boost bank turnover.
Bank turnover is balanced by losses. These losses come in the form of wages, taxes and general costs primarily. It also comes from paying out interest to investors and savers and losses on investments in the markets. If a bank loans out too much money in the form of loans and mortgages, the bank turnover may plummet if a large enough block of loans is not repaid.