Net Interest Margin

NIM. A banks net interest income divided by its average earning assets, expressed as an annualized percentage. NIM measures how much spread the bank captures on its core borrow-short-lend-long business, after netting the interest paid on deposits and other liabilities against the interest earned on loans and securities. Widening NIM signals an improving spread environment (typically a steepening curve and rising rates with sticky deposits); compressing NIM signals the opposite. NIM is the single most important profitability metric for traditional banks.

Lessons that use this term

• Reading a Bank Income Statement
• Yield Curve Shape and Bank Net Interest Margin
• Why a Bank Reads Backwards
• Net Interest Margin: The Spread Engine

Related terms

10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods

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