Evening star., 1925-07-19
Analyses of Local Banking
Seen Under the Microscope
Important Committees Report on Cost of
Handling Large and Small
Checking accounts.

and summarized them as a basis for
future consideration.
Cost was figured on S14 overhead
on each 81 900 of deposits. An aver
age cost of 6 cents was made for each
item posted to the account Of de-
positor.
Just how these charges were agreed
upon by the Joint committee was not
explained in the report to the bankers
convention. Mr.. Poole, chairman,
when asked concerning the matter, eX-
pressed a strong desire to explain the
method employed to find the basic
analysis figures at an early meeting
of the District Bankers Association.
Three elaborate tables of great value
were prepared by Mr.. Poole and copies
of these were freely circulated at the
recent convention and a few are still
available for local bankers.
Actual Results Valuable.
This joint committee found that a
deposit account of $25, with but one
ledger posting a month would return
a profit of cents, each additional
posting turning the scale the other
posting. An average balance Of 500
will support five check or deposit
transactions a month.
The second table is monthly an
alyses for checking accounts on the
basis of actual cost plus a suggested
profit of 1.20 per cent per annum.
Under this table a s25 balance with
one posting ls an actual loss, 500
balance will support three postings "a
month. $500 balance having 15 post
ings a month shows a net profit to the
bank of 10 cents.
Banks Must Have Profits.
Banking is no different from any
other form of business. There must
be profit. Not necessarily profit on
every transaction, but, generally
speaking. a profit from all. Thirty
seven per cent of the checking ac-
counts are found to average $40. They
total about threefourths of per cent
OF all the money on deposit, and they
represent more than Is per cent OF
all the work done. Obviously, this
volume of work cannot be supported
out of the lending power of so small
percentage Of money.
This situation of Improbable busi-
ness is not the fault of the customers
of the banks, 1t is the fault of bank
ers themselves. They have never
told the public what pays and what
does not pay. Business has been
sought, making no terms as to bal
ances and activity. The depositor,
therefore. assumes that his account
Is desirable and that 1t pays.
The banks must first find the facts
and then determine a basis on which
accounts can be handled. taking the
public into their confidence and
frankly discussing the entire matter,
the committee believes.
National Banks Showing.
The big third sheet is a report of
the national banks Of Washington,
Il in number. Commenting of this,
the report said in part:
Money invested in stocks and
bonds should bring per cent return.
Let US suppose you are now dealing
with S16 1000. 900. You invest II In
securities and 1t returns SS6O,000 a
year. but If you invest it in business
you expect a larger. return, or there
would be no incentive to take worries
and risks.
Twelve national banks in this city
cid have $4,000, 900 of shareholders
money. Their total net profits from
all sources before dividends was
sI,027 600 In percentages, these
banks earned 7.S4 per cent on their
invested capital. Their total profit
was 06 per cent on S117 900 900 of
their own and their depositors' money.
Again, II SIG 900 900 shareholders
money was figured as earning per
cent, then the balance of the earnings
of the national banks amounting to
$500 900 represents every penny earn
ed on s109, 200 900 of depositors'
| money. That is 29-1o0 of 1 per cent
year-29 cents a year on every 800
of deposit. 2 cents a month on a
normal 500 account. 20 cents on
| normal $1,000 account and 81 on a
| normal $4,000 account"
More than 81 per cent of local
checking accounts were found to
| average about $50.