Net Interest Margin (NIM)

The bank's core spread.

A bank earns interest on loans and pays interest on deposits. Net interest margin is the gap between the two, as a percentage of its lending assets. It is the core profitability of the banking business. NIM = (Interest earned − Interest paid) ÷ Average earning assets × 100 A bank earns Rs 90 interest and pays Rs 50, on Rs 1,000 of earning assets. NIM = (90 − 50) ÷ 1,000 × 100 = 4%. Higher NIM Wider spread, more profitable lending. Falling NIM Squeezed spreads, often from competition or rate pressure. Core bank profitability Comparable between banks Tracks lending strength Very high may mean risky lending Rate cycles move it Ignores loan losses

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Banks.