A bank does not sell a product at a margin. It funds itself, lends at a spread, and books profits that remain an estimate until the loans are actually repaid. That makes the usual margin-and-return questions misleading, so the Bank template scores what really determines a bank's durability: where its funding comes from, what it lends against, how much capital stands behind it, and whether it has been pricing risk honestly.
Deposit Franchise
Score 43
· 22% of the moat score
A deposit franchise is the cheapest and most valuable thing a bank can own. Depositors who stay through a rate cycle without being paid the market's top rate give the bank funding its competitors have to go out and buy. It is the closest thing in banking to pricing power, and it shows up as profitability that does not collapse when funding costs rise.
Lending Advantage
Score 36
· 18% of the moat score
Lending advantage is the ability to originate loans at attractive spreads without buying that volume with looser credit standards. Any bank can grow a loan book by lending to worse borrowers; the advantage lies in a niche, a relationship, or an underwriting capability that earns the same spread against better collateral. It reads through as a margin that is both above peers and stable.
Capital Strength
Score 48
· 20% of the moat score
Capital is the buffer between loan losses and insolvency, and it is what regulators judge a bank on first. Strong capital is not merely prudence, it is optionality: well-capitalised banks keep lending through a downturn, buy assets from weaker rivals, and return capital to shareholders, while thinly capitalised ones raise equity at the worst possible moment.
Cost Discipline
Score 36
· 16% of the moat score
Banking carries high fixed costs in branches, compliance and technology, so what it costs to run the bank relative to what the bank earns is a genuine competitive variable. A structurally lean bank can price a loan more finely than an expensive rival and still earn the same return — and it has more room to absorb a bad credit year without pulling back.
Revenue Diversification
Score 56
· 14% of the moat score
A bank earning everything from net interest income is a leveraged bet on the rate cycle. Fee income — advisory, payments, cards, wealth management — is earned regardless of where rates sit and consumes little additional capital. Diversified banks show revenue that grows more steadily through the cycle, which is what this defense reads.
Risk Management
Score 67
· 10% of the moat score
Risk management is the defense that only reveals itself late. Underwriting mistakes are invisible while credit is expanding and then appear all at once, so the score looks at the shape of results over several years rather than at any single one. Earnings that never needed a large correction are the strongest available evidence that risk was priced honestly.