Net interest margin (NIM) is a measurement comparing the net interest income a financial firm generates from credit products like loans and mortgages, ...CorporateFinance&AccountingDebtCorporateFinance&AccountingGuidetoAccountingFinancialAnalysisCorporateFinanceFinancialStatementsFinancialRatiosAccountingDebtMergers&AcquisitionsCorporateInsuranceSeeAllTableofContentsExpandWhatIsNetInterestMargin?CalculatingNetInterestMarginWhatAffectsNetInterestMarginNetInterestMarginandBankingHistoricalNetInterestMarginsWhatIsNetInterestMargin?Netinterestmargin(NIM)isameasurementcomparingthenetinterestincomeafinancialfirmgeneratesfromcreditproductslikeloansand mortgages,withtheoutgoinginterestitpaysholdersofsavingsaccountsand certificatesofdeposit (CDs).Expressedasapercentage,theNIMisaprofitabilityindicatorthatapproximatesthelikelihoodofabankorinvestmentfirmthrivingoverthelonghaul.Thismetrichelpsprospectiveinvestorsdeterminewhetherornottoinvestinagivenfinancialservicesfirmbyprovidingvisibilityintotheprofitabilityoftheirinterestincomeversustheirinterestexpenses.Simplyput:apositivenetinterestmarginsuggeststhatanentityoperatesprofitably,whilea negativefigure impliesinvestmentinefficiency.Inthelatterscenario,afirmmaytakecorrectiveactionbyapplyingfundstowardoutstandingdebtorshiftingthoseassetstowardsmoreprofitableinvestments.1:43NetInterestMarginCalculatingNetInterestMarginNetinterestmarginmaybecalculatedbythefollowingformula:Net Interest Margin=IR−IEAverage Earning Assetswhere:IR=Investment returnsIE=Interest expenses\begin{aligned}&\text{NetInterestMargin}=\frac{\text{IR}-\text{IE}}{\text{AverageEarningAssets}}\\&\textbf{where:}\\&\text{IR}=\text{Investmentreturns}\\&\text{IE}=\text{Interestexpenses}\\\end{aligned}​Net Interest Margin=Average Earning AssetsIR−IE​where:IR=Investment returnsIE=Interest expenses​Considerthefollowingfictitiousexample:AssumeCompanyABCboastsareturnoninvestmentof$1,000,000,aninterestexpenseof$2,000,000,andaverageearningassetsof$10,000,000.Inthisscenario,AB