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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 probably not actually happening
    – Jake Freeman
    Commented Sep 27, 2020 at 19:47
  • You’ll need to tell us what country it is, what currency it is, and what bank it is, if you want to get any kind of a reasoned answer.
    – Mike Scott
    Commented Sep 27, 2020 at 19:50
  • @JakeFreeman I am 100% sure it is, I had a look at his account statements and all the numbers are correct. One possibility would be that bank could have made a mistake or maybe they only allow a small percentage of people to take a loan a lower interest rate than they charge for savings account to increase their cash flow and lend out the net amount of money they get received by the end of the first year (439,333 - 120,000= 319333) at normal/higher rates?
    – IPlanToTravelTheWorldOneDay
    Commented Sep 27, 2020 at 19:52
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    Is the loan at.a fixed interest rate or just the savings account. If the loan is a variable rate loan then perhaps the bank has reason to expect that interest rates will increase over the next 3 years.
    – Robert Longson
    Commented Sep 27, 2020 at 20:38
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    Have you checked the bank's published interest rates for both deposits and loans? NBE's English language site doesn't carry such information, so I can't check. Call them up and ask about a loan and/or deposit yourself. Also is your friend suggesting that you give him money so that he can do the same for you?
    – DJClayworth
    Commented Sep 27, 2020 at 21:33

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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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  • I believe that it is a secured loan as my friend has most of their money about > 1.5 M (EGP) with the same bank. The loan was taken on March 2020, and a few days after received the money, he deposited the whole amount into a certificate of deposit with a return of 12% for three years. The loan was a 3-year fixed interest loan, at an interest rate of 10.6% and no other fees. > If this is some friend on internet, it could be a scam. haha, he's not, he's a close childhood friend dw
    – IPlanToTravelTheWorldOneDay
    Commented Oct 3, 2020 at 18:10

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