Net interest margin (NIM)

Net interest margin (NIM) measures how profitably a bank or lender uses its interest-earning assets, such as loans and securities. It is calculated as (interest income − interest expense) / average interest-earning assets, expressed as a percentage, usually reported quarterly or annually.

NIM captures the spread between what a bank earns on what it lends and invests, and what it pays on deposits and other funding. It moves with the interest-rate environment and the shape of the yield curve: banks generally benefit when they can fund short-term at low rates and lend longer-term at higher ones, so margin compresses when short-term rates rise faster than long-term rates or when the curve inverts. NIM differs from overall bank profitability measures such as return on assets, since it isolates the core lending spread from fee income, trading gains, and operating costs.

NIM matters as a leading indicator of a bank's core earnings power and is closely watched alongside credit-quality metrics, since a bank can grow NIM by taking on riskier loans that carry a higher expected probability of default and loss given default. Analysts typically look at NIM together with credit scoring performance and loan growth rather than in isolation, because margin expansion driven purely by riskier lending is not a sustainable improvement.