BFM Numericals Solved · Part 4: Risk and capital

Chapter 15: Profitability and loan pricing

Where a bank’s profit comes from, why its margin moves, and how to price a loan so that it pays for its funds, its costs, its risk and its capital.

Open Chapter 15 in the e-book The book and its prices

Buyers of the e-book, or of the print copy, which includes it, read the whole chapter. Everyone can read the free sample, pages 1 to 24 of the e-book.

In this chapter

15.1NII, spread and NIMp. 305
15.2What moved NIIp. 306
15.3From margin to ROA and ROEp. 307
15.4Funds transfer pricingp. 308
15.5RAROC and the hurdlep. 309
15.6MCLR and external benchmarksp. 310
Which formula? And four 30-second routesp. 311
Exam traps and conventionsp. 312
Practice: 24 questions in three roundsp. 313
Answers, with every wrong option explainedp. 315
Make it stickp. 317
Chapter 15 on one pagep. 318

Corrections and updates

None for this chapter so far. Every correction to the book, and any rule that changes after its date, is listed on the errata page.