Public Banks, if properly legislated and set up, should be profitable in the very first year. Because public banks have very low overhead, no branches, no ATMs, and can be initially managed out of a single office, it can and should focus on lending. If lending is narrowed to a sovereign entity, like a city, county, or state, for infrastructure, the bank can leverage its capital 10 to 20 times, as the Risk Weight is near zero…according to the Basel III accords.
Public Banks, like any other depository institution, will require initial capitalization. For a city of about 100,000, a reasonable initial capitalization of about $30M should be sufficient. From this base, the bank can lend to its respective government about $300M to $600M.
Raising the initial capital can be challenging as governments are increasingly strapped for cash and trapped in a debt spiral from which escape seems like a pipe dream. But there are sources like pension funds, rainy day funds, and bond offerings that can be used to provide the necessary start up capital.
One promising way of raising capital where the average citizen can participate by whatever financial means they have, are the relatively new Tokenized Municipal Bonds. Unlike traditional municipal bonds that require a minimum investment of about $5000, with costly fees by several intermediaries, each taking a cut, tokenized municipal bonds eliminate the middlemen and introduce fractionalized bond issues that allow small fractions of a bond to be bought and sold, democratizing the bond market for the average person who can now make a $10, $20, $50, or $100 investment. This technology is fast becoming a revolutionary tool in financing, giving bond market access to everyone.
See my discussion with GROK on Tokenized Bonds.