Chapter 5
The Performance of Nontraditional Banking Companies
Chapter Objectives
1. Introduce examples of the different forms of nontraditional banking companies.
2. Examine and analyze the financial performance of Goldman Sachs.
3. Examine and analyze the financial performance of Mutual of Omaha Bank.
4. Examine and analyze the financial performance of BMW Financail Services and BMW Bank of North America.
5. Describe the form and function of Industrial Loan Companies (ILCs)
Key Concepts
1. The Financial Services Modernization Act of 1999 effectively allowed commercial and investment
banks to merge.
2. Investment banking activities include:
a. Securities underwriting
b. Advisory services
c. Market making
d. Propriety trading and investing
3. In 2007, Goldman Sachs’ financial performance was impressive. However, the same business model
caused Goldman to report its first quarterly loss since it began trading as a public company.
Goldman Sachs converted to a FHC, partly due to the credit crisis of 2007 – 2009.
4. The insurance company Mutual of Omaha owns Mutual of Omaha Bank. The bank’s strategy is to
“acquire community banks in fast-growing cities with a high density of Mutual of Omaha insurance
customers.” The business model is to combine insurance and banking activities
5. Industrial Loan Companies (ILCs) originated in the early 1900s to make loans to borrowers who
could not get loans at commercial banks. Over time, ILCs were granted the right to issue deposits
that were insured by the FDIC. The majority of ILCs are based in Utah, California, Colorado, and
Nevada. Most ILCs operate to assist their parent organization in some facet of the #rm’s core
business.
6. BMW Bank of North America is an ILC owned by BMW Financial Service. BMW Financial Services
offers loans, leases, and credit cards via BMW Bank. BMW Bank is chartered by the state of Utah
and is also regulated by the FDIC. BMW Bank makes loans to individuals either in the form of credit
card loans or loans for automobiles. The bank obtains most of it financing in the form of small time
deposits and federal funds purchased
Teaching Suggestions