Let us first introduce the income statement of e-Bank. The income statement of a company shows the change in the wealth of shareholders (the equity) over a specific period of time.
|Income statement ($ million), 2006|
|Interest income||90||Interest earned on loans and bonds|
|–||Interest expenses||–70||Interest paid on deposits|
|Net interest margin||20|
|+||Non-interest income||30||Such as commissions from services (for example, credit card fees) or trading revenue|
|–||Provisions for bad debt||–10||Provisions for losses on loans|
|–||Operating expenses||–22||Non-interest expenses such as wages|
|Profit before tax||18||and computers|
|–||Corporate tax (40%)||– 7.2|
|Profit after tax||10.8|
The balance sheet of e-Bank is similar to the one presented in Stage 1.