Can banks charge a lower interest rate for loans than for their fixed term savings account and still make profit?
A friend of mine got a loan of 1,000,000 at an interest rate of 10.6% per year for three years and then deposited that 1 million at 3-year fixed-term non-accessible savings account with a return interest rate of 12% per year at the same bank. In the short term, at the end of each year, he will have paid (106,000 + 333,333) = 439,333 and received back the 12% from the savings account which amounts to 120,000.
That means that at the end of the three-year period he will have received 360,000 in interest payments and the 1,000,000 back totaling 1,360,000 and will have paid 1,318,000(439,333*3) therefore making a profit of 1.4% per year.
How is that possible? Why would the bank lend out money at a lower rate than they're paying their depositors for it? Why would the bank intentionally incur a loss? Did I miss something?
Edit: The country is Egypt, the currency is Egyptian pounds, and the bank is NBE
Edit 2: Sorry, turns out the bank is Banque Misr not NBE
Edit 3: By fixed-term non-accessible savings account I meant Certificate of Deposit
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This is not possible. An unsecured loan for short term can't be lower than term deposits.
If its genuine, it could be there is a huge loan sanction fees that makes up for difference... or this was done at different times and the rates went up.... if this was a 20 year loan at variable interest rates, its possible in some years for something like this to happen...
If this is some friend on internet, it could be a scam.
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