Net Interest Margin
A bank profitability metric measuring the difference between interest income earned and interest paid, relative to assets.
What is NIM?
Net interest margin (NIM) is a measure of bank profitability calculated as net interest income (interest earned on loans and investments minus interest paid on deposits and borrowings) divided by average earning assets. It represents how effectively a bank generates income from its loan and investment portfolio relative to the cost of funding it. NIM is expressed as a percentage: a NIM of 3% means the bank earns $3 for every $100 in earning assets, after paying depositors and creditors. NIM expands when loan rates rise faster than deposit rates (rising interest rate environments often help banks) and compresses when funding costs rise faster than asset yields.
Example
JPMorgan Chase reported a net interest margin of approximately 2.7% in 2023. With $3.4 trillion in earning assets, this translated to over $90 billion in net interest income — JPMorgan's largest revenue source. When the Federal Reserve raised rates sharply in 2022–2023, JPMorgan's loan yields repriced upward faster than its deposit costs, causing NIM to expand from roughly 1.6% in 2021 to 2.7% by 2023 — a nearly 70% improvement in this key profitability measure.