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Pittsburg, Kansas | That is something a person has to remember when it comes to banks.
They are the ultimate leveraged business (well maybe hedge funds). They create money through lending multiples of what they have assets to back it. Not unusual for them to be operating on 10% equity.
In the lending business they make no money if they lend no money. So the best customers are not the ones who need to borrow the least money. They will not have a goal of you getting out of debt. The ones working for the system may have bonuses and income based on how much they loan you, not how much you pay off.
So their best customers are the ones just good enough to make their payments but not so good they get enough ahead to ever not need the loans to stay in business.
Of course, the worst customers and biggest headaches are the ones who can't make their payments. Although banks get to create money out of nothing, they do not get to keep it and have to replace it out of equity if it is "lost". Being highly leveraged as banks are, loan loss ratios going the wrong direction is a big red flag and circling of the wagons.
I have been a pretty good customer for them over the years.
John | |
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preliminary 2019 financial results
