How Banks Actually Make Money — And Why Your Advice Isn't Neutral

JPMorgan Chase earned $57.0 billion in net profit in 2025.

One of the largest annual profits ever reported by a bank, anywhere.

But the interesting number is not the profit. It is what sits underneath it.

That year, JPMorgan booked $185.6 billion in managed revenue. Of that, $87.0 billion — roughly 47% — was noninterest revenue.

Read that again, because it inverts what most people assume a bank is.

Nearly half the revenue of the most profitable bank on earth had nothing to do with lending money. It came from fees, trading, asset management, payments — the parts of the business that most customers never think about, and that nobody explains to them.

That split is not trivia. It is the single best predictor of what your bank will recommend to you.

Think of a bank as a supermarket

A supermarket buys a product cheaply and sells it dearer. That is the aisle margin. For a bank, the product is money: it takes your deposit, pays you a little, lends it out, and charges a lot.

But no supermarket survives on aisle margins alone.

It earns at the checkout — transaction fees. It earns from shelf placement — which products get promoted and which get buried. And it earns from services you never notice — delivery, loyalty schemes, data.

A bank is built exactly the same way. Three pillars.

Pillar one: interest

The one everyone knows.

You deposit money. The bank pays you a small rate. It lends that money out as mortgages, business loans and consumer credit at a much higher rate. The gap is the net interest margin.

According to the FDIC, the US banking industry’s net interest margin hit 3.39% in the fourth quarter of 2025 — the highest since 2019, and above the pre-pandemic average of 3.25%.

European margins are structurally lower, and not because European bankers are worse at their jobs. It is a balance-sheet difference: American banks carry far more high-yield credit card debt. Higher risk, higher yield, wider spread.

And the spread is not a trick. The bank earns it by taking on real work: the risk that borrowers default, the mismatch between short-term deposits and long-term loans, the infrastructure that moves money at all.

Historically, this was the whole story of banking.

It is not any more.

Pillar two: fees — and this is the one that concerns you

Custody. Advisory. Execution. Cards. Accounts. Asset management.

Anything the bank does for you that is not lending or borrowing has a fee attached.

Again — these are not fraudulent charges. Custody means someone is legally responsible for safeguarding your securities. Advisory means analysts are paid to research. Execution means there is infrastructure routing your order to a venue. These things genuinely cost money to run.

The scale, though, is worth sitting with. At Deutsche Bank in 2024, commissions and fee income were €10.4 billion out of €30.1 billion in net revenues — about 35%, and growing 13% year on year.

And that is the direction of travel across European banking. As interest margins normalise, fee income becomes the growth engine. Which means: more product recommendations, more wealth-management pitches, more reasons to understand what you are being sold.

Pillar three: trading and treasury

The one nobody thinks about.

Banks buy and sell currencies, bonds and derivatives every day — sometimes for clients hedging a real exposure, sometimes to manage their own balance sheet.

And they act as market makers. When you click Buy, someone has to be on the other side. Often it is a bank. It holds inventory, quotes prices, and absorbs the imbalance.

This is easy to sneer at and shouldn’t be. Without market makers there is no instant execution, prices gap around violently, and small orders sit unfilled. The liquidity you take for granted is a product somebody manufactures. (How that works for your order specifically is a story of its own.)

Now the number that shows how the bank earns from you

Here is the arithmetic that changes how you hear the phrase “we’d recommend…”.

Illustrative, with the assumptions stated openly — your own numbers will differ, and you should check them:

You invest €10,000 in your bank’s own active fund.

• Front-end load, typically around 5% → €500 on day one
• Annual charge, typically 1.5–2% → another €150–200 in year one

The bank’s first-year revenue: roughly €650–700.

Now the same €10,000, at the same bank, into an ETF.

• No front-end load
• Annual charge around 0.2% → €20 — and it goes to the ETF provider, not the bank
• The bank keeps an execution fee and custody → perhaps €50–170 in year one

The bank’s first-year revenue: roughly €50–170.

Same customer. Same money. Same institution. Roughly an order of magnitude difference in what the bank earns.

So ask yourself the question that follows:

When did your bank adviser last sit you down and say — actually, in your situation, an ETF would serve you better?

Probably never. Now you know why.

And underneath that, a second layer: retrocessions

When your bank sells you a third-party fund, that fund pays the bank a recurring commission — every year, for as long as you hold it. It comes out of the fund’s management fee, which means you pay it whether or not you ever see it named.

Under MiFID II, Article 24, this must be disclosed to you: before you buy, and annually thereafter.

Disclosure is not the same thing as attention. The document exists. Almost nobody reads it. Very few advisers point at it.

The fair version of this argument

I want to be precise here, because the lazy version of this story is a conspiracy and the lazy version is wrong.

Your bank is a business. It has shareholders and revenue targets. Recommending the product that generates more revenue is not corruption — it is commercial logic behaving exactly as designed. And the bank really does deliver the services it charges for.

But there is a word for the gap between what is best for you and what is most profitable for them.

The word is misalignment.

Knowing the misalignment exists is not cynicism. It is literacy.

And the systems that tried to remove it teach an uncomfortable lesson. The United Kingdom banned commission payments for retail investment advice in 2013. Product costs came down — and advice promptly became expensive enough that a large part of the population simply stopped receiving any at all. Germany kept commissions, and remains overwhelmingly commission-based.

There is no clean system. There is only an informed customer.

Three things you can actually do

CHECK — read three lines of your bank’s annual report

It is public. Every listed bank publishes it.

Find: net interest income, fee and commission income, trading income.

A bank earning most of its money from fees behaves differently from one earning it from interest. The first sells products. The second sells loans. Both are legitimate — and now you know which one is talking to you.

UNDERSTAND — ask which pillar the recommendation feeds

Every time a product is recommended, one question:

• Their own active fund? → Pillar two. The bank earns a large multiple of what it would from an ETF.
• A third-party fund? → Pillar two again, via retrocessions, every year you hold it.
• An ETF? → Almost nothing.

This does not make the recommendation wrong. It means the incentive is not neutral, and you should weigh it accordingly.

APPLY — ask for the ex-ante cost disclosure

This is the one thing to do this week.

Before you buy anything, ask for the ex-ante cost disclosure. In the EU, your firm is legally required to give it to you — MiFID II and Commission Delegated Regulation (EU) 2017/565, Article 50.

It lists every fee, every commission, every third-party payment — in euros, not percentages. Percentages hide; euros do not.

Then look up a comparable ETF and compare the totals.

The difference between those two numbers is the price you are paying for the advice. Whether it is worth it is your call — but you should at least be the one making it.

The thing worth remembering

Interest. Fees. Trading. Three pillars, all legitimate, none hidden.

But the balance is shifting. Record interest margins are normalising, and the pressure to grow fee income is intensifying — which means the next few years will bring more recommendations, not fewer.

The next product your bank suggests is not a scandal. It is business.

It is simply not neutral advice.

The system is not broken. It was just never designed with you in mind.