Net interest margin (NIM) is a financial indicator that measures the profitability of a bank or other financial institution. It is calculated by dividing the net interest income (interest income minus interest expense) by the total earning assets.
NIM is a main indicator of a financial entity’s health and efficiency. It can help investors determine whether to invest in a financial services firm, and can provide insight into a firm’s cost structure:
- Positive NIM:
- A positive NIM indicates that the entity is operating profitably.
- Negative NIM:
- A negative NIM indicates that the entity is inefficient and may need to take corrective action.
