How to calculate PTSB's cost of funding?

W

willf_ie

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I'm pulling my hair out trying to figure a way of calculating the cost of funding for a certain bank I'm dealing with. PTSB :eek: The annual reports are there on their website. I can see from looking at a few university slides from the US that the formula boils down to:

Annual Expenses/Net Deposits*100%

Can anyone assist in the calculation of the figure?

Will F
 
Cost of funding is the cost to the bank of the funds it needs to function. This is a combination of dividends paid to shareholders and interest paid to lenders.

The fomula you quote is the cost of administration
 
It's an interesting question, but it depends on what you want to do with the answer.

They have a blended cost which includes

ECB funding at 1.25% (I think, but it may be 2.25%)
Cheap deposits
Expensive deposits to attract new business
Bonds

The question could be asked "Why are they charging mortgage holders 6% when they are paying the ECB only 1.25%?"

But the 1,25% would not be a fair cost. They are under huge pressure to get their loans/deposits ratio down i.e. to increase their deposits and reduce their loans. To attract new deposits they have to pay 3%.

So I would say that their marginal cost of funding is 3%.
 
Thanks for the replies,
The formula I had above came from an example, that I can't post the url to. But google;

banks cost of funding formula and its the first link. But I really wanted a handy formula to calculate the banks cost of funds to help in a mortgage negotiation. I am guessing it to be approx 5% but wanted to have the "science bit" right. I'm supposed to have a degree in Banking and Finance. Damned if I remember ever doing something useful....
 
Mmmmm 3% cost 6% sell that's 100% gp don't know many businesses with that gross profit and they still can't make It work - what does that tell you ?
 
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