A
Bank had posted interest revenues of TK. 80 million and interest expenses from
all of its borrowing of TK. 50 million. If the bank posses TK. 750 million in
total earnings assets, what is the net. Interest margin of this bank?
The
Net Interest Margin (NIM) is a measure of the difference between the net
interest income generated by the banks from their earnings assets and the
amount of interest paid to the Borrowers, depositors etc. It is typically
expressed as a percentage. The formula to calculate the Net Interest Margin is
Net
Interest Margin= {Interest Revenues – Interest Expenses)/Total Earning Assets}
*100
Given,
Interest Revenues = TK. 80 million
Interest
Expenses = TK. 50 million
Total
Earnings Assets = TK. 750 million
First
calculate the net interest income:
Net interest Income = Net interest revenue -
Interest expenses
Net
Interest Income = TK. 80 million - TK. 50 million = TK. 30 million
Next,
Calculate the Net Interest Margin (NIM):
NIM
= (Net Interest Income / Total Earning Assets)*100
NIM
= (TK. 30 million / TK. 750 million) *100
NIM
= 4%
Thus
the Net Interest Margin (NIM) of the bank is 4%