net interest margin

The amount of interest income minus interest expense, usually expressed as a percentage. The net interest margin percentage is calculated by dividing interest income less interest expense by average earning assets. If interest income includes tax-free income, that income should be "grossed up" to its taxable equivalent before calculating the percentage. (To gross up tax-free income to its taxable equivalent, divide the income by one minus the marginal income tax rate.) The net interest margin expressed as a percentage of earning assets is often confused with the net spread. The spread is the difference between the average rate earned on assets minus the average rate paid on liabilities. That spread would only equal the net interest margin percentage if the dollar amount of earning assets equaled the dollar amount of interest-bearing liabilities. American Banker Glossary

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net interest margin net interest margin margin

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net interest margin UK US noun [C] BANKING, FINANCE
the difference between the interest that a bank pays to people with money in the bank and the interest received from people borrowing money: the net interest margin rises/falls »

The bank's net interest margin, a key measure of loan profitability, rose to 4.61% from 4.52%.


Financial and business terms. 2012.

Look at other dictionaries:

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