In recent years, Italian banks’ revenues from lending activities have been declining, while those from bank commissions and financial trading activities have been growing. Loans to businesses have plummeted. Although they have fallen in recent years, banks’ costs in Italy remain the highest in Europe. Italian banks have one of the lowest earnings from bank lending activities as a percentage of total revenues in Europe. Moreover, with the economic crisis, non-performing loans have increased, reducing banks’ profitability margins. Therefore, banks have considered it more convenient to reduce loans and risks, and to increase revenues from commissions on current accounts and extra-credit activities (sale of securities, currencies, equity instruments, etc.).
In the comparison between April 2016 and April 2015 alone, the contraction in loans to businesses was 25.3 billion euros. The comparison with April 2011 is even more pitiless, the decrease amounts to over 110 billion. The interesting thing is that the reduction has not affected everyone in the same way: in fact, 80% of the loans granted by Italian banks go to the first 10% of the largest entrusted which consists almost exclusively of large companies and industrial groups that represent about 1% of total companies!
But it is not that this small group of companies is financed because it deserves it, being the “creme de la creme” of solvency. On the contrary, the share of insolvency for the largest companies is around 81%! In essence, banks finance almost exclusively the worst payers that can be financed on the Italian market. Whoever proves to be a good payer, on the other hand, receives the money with the eyedropper”.
(We invite you to take a look at the new investment-help project designed for this large category of companies).
And so one wonders how do banks thrive? Savers and investors have become a huge dairy farm and banks are milking them relentlessly. They offer safe investments, profitable investments, they hammer the current account holders with offers that cannot be refused for the great convenience as long as they invest today, without too many questions.
THEY RAISE REVENUES FROM BANK COMMISSIONS AND FINANCIAL TRADING
Net interest income is the difference between accrued interest on assets and liabilities. In particular, net interest income is mainly determined by the net income closest to the banks’ core business, i.e. credit intermediation. Net interest income fell due to both lower profitability and the credit crunch during the recession. Between 2008 and 2014 it fell by 12.3% to 39.3 billion euros in absolute terms.
Net commissions, on the other hand (commission income on services provided and commission expense for services received). for banking services such as current accounts, ATMs/credit cards, collection/payment, asset management, brokerage and securities placement, again between 2008 and 2014, increased by 2.8% to 27.6 billion euros. Other net revenues: a category that includes a whole series of revenues from non-credit or financial trading activities; such as trading activities (sale of securities, currencies, equity instruments) or insurance, it increased by 471.1% over the same period, reaching 11.4 billion euros in absolute terms.
THE IMPORTANCE OF KNOWING THE SIZE AND PROPORTIONS OF BANKS’ REVENUES
These data are useful to get an accurate picture of how these masters and giants of the economy work. What is interesting is to see how the banks are shifting their interests from the activities for which they were born, i.e., guarding money and lending it to financial advisory activities. The difference between the two types of activities is clear: in the second, the risk is zero compared to the first.
In addition, acting as advisors for investors and savers also gives the banking system another extraordinary opportunity. To be able to shift the risk of their activity as money lenders to unsuspecting and confident savers, by making them invest in bonds, for example.
Such securities represent the debts that big companies have with the banks, which thus shift the debt from their own to the pockets of their current account holders. Who does not remember the Parmalat and Cirio scandals, to name but two.
All this is disarming, especially for small savers who place a great deal of trust in their bank and, unfortunately, have no alternative: the banks know this and take advantage of it. Investors who know one or more sectors of the economy today have a new tool to free themselves from this system: Iosono Banc! an innovative system for investing today.