Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of ...NetinterestmarginFromWikipedia,thefreeencyclopediaJumptonavigationJumptosearchNetinterestmargin(NIM)isameasureofthedifferencebetweentheinterestincomegeneratedbybanksorotherfinancialinstitutionsandtheamountofinterestpaidouttotheirlenders(forexample,deposits),relativetotheamountoftheir(interest-earning)assets.Itissimilartothegrossmargin(orgrossprofitmargin)ofnon-financialcompanies.Itisusuallyexpressedasapercentageofwhatthefinancialinstitutionearnsonloansinatimeperiodandotherassetsminustheinterestpaidonborrowedfundsdividedbytheaverageamountoftheassetsonwhichitearnedincomeinthattimeperiod(theaverageearningassets).Netinterestmarginissimilarinconcepttonetinterestspread,butthenetinterestspreadisthenominalaveragedifferencebetweentheborrowingandthelendingrates,withoutcompensatingforthefactthattheearningassetsandtheborrowedfundsmaybedifferentinstrumentsanddifferinvolume.Calculation[edit]NIMiscalculatedasapercentageofnetinterestincometoaverageinterest-earningassetsduringaspecifiedperiod.Forexample,abank'saverageinterest-earningassets(whichgenerallyincludes,loansandinvestmentsecurities)was$100.00inayearwhileitearnedinterestincomeof$6.00andpaidinterestexpenseof$3.00.TheNIMtheniscomputedas($6.00–$3.00)/$100.00=3%.Netinterestincomeequalstheinterestearnedoninterest-earningassets(suchasinterestearnedonloansandinvestmentsecurities)minustheinterestpaidoninterest-bearingliabilities(suchasinterestpaidtocustomersontheirdeposits).Inparticular,forabankorafinancialinstitution,ifthebankorfinancialinstitutionhasasignificantamountofnon-performingassets(suchasloanswherefullrepaymentisindoubt),itsNIMwillgenerallydecreasebecauseinterestearnedonnon-performingassetsistreated,foraccountingpurposes,asrepaymentofprincipalandnotpaymentofinterestduetotheuncertaintythattheloanwillbefullyrepaid.Seealso[edit]NetinterestfactorsNetinterestincomeReference