How do banks make money: Answer Guide 2027
Banks make money three main ways: net interest income (the spread between what they earn on loans and pay on deposits), fee income (advisory, underwriting, asset management, trading commissions), and trading income (market-making spreads and proprietary positioning where permitted). In a how banks make money interview, name all three buckets and tailor the emphasis to the division you are applying to.
What This Tests in a How banks make money interview Question
- Whether you see the full picture: many candidates name lending only and forget fees and trading.
- Whether you can tailor the answer: an IBD candidate should lead with advisory and underwriting fees; a markets candidate with trading and spreads.
- Whether you understand the spread concept — banks profit on the difference between funding costs and asset yields.
How to Answer a How banks make money interview Question
- Lay out the three buckets: net interest income, fee-based income, and trading/market-making income.
- Explain the spread with a simple example: pay depositors 2%, lend at 5%, keep the difference minus costs and losses.
- Tailor to your division: emphasize the revenue lines of the desk or group you want to join, and mention that mix may vary by bank and region.
Example phrasing: "Banks earn net interest income on the spread between lending and deposit rates, fee income from advisory, underwriting and asset management, and trading income from market-making. For a markets role, I would emphasize flow trading spreads and financing revenues as the key drivers."
Common Mistakes in a How banks make money interview Question
- Answering only 'they lend money and charge interest' — true for retail, incomplete for a full-service bank.
- Mixing up revenue with profit by ignoring credit losses and operating costs.
- Giving a generic answer when applying to a specific division; tailor it.
This is the single most common 'do you understand banking' filter, and it takes two minutes to prepare. Candidates who structure the three buckets and tailor to their division sound like insiders; everyone else sounds like they skimmed a Wikipedia page.
Keep Reading
- goldman sachs vs societe generale interview
- currency swap interview
- Goldman Sachs Video Interview: Own the Mistake
- Goldman Sachs Video Interview: Treasury Judgment
FAQ
How do banks make money in a how banks make money interview?
Through net interest income (lending spreads), fee income (advisory, underwriting, asset management), and trading income (market-making and positioning).
What is net interest income?
The difference between interest earned on loans and securities and interest paid on deposits and other funding.
Do investment banks make money differently from commercial banks?
Yes — investment banks lean on fees and trading, while commercial banks lean on net interest income; universal banks do both.
What is the biggest cost for a bank?
Credit losses on loans and operating costs, especially compensation — revenue is only half the story.
Preparing for Goldman Sachs's interview? Our 2027 Goldman Sachs Video Interview, Coding & Math Technical Assessment Answers has practice questions and answers — $79 one-time, instant download.
