Determinants of Banks’ Net Interest Margin: Evidence from the Euro Area during the Crisis and Post-Crisis Period

Angori, Gabriele; Aristei, David; Gallo, Manuela

doi:10.3390/su11143785

Cited by 54 publications

(42 citation statements)

References 48 publications

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“…Mesfin and Ram (2019) also investigated the determinants of the NIM by using the panel data from 13 banks in Ethiopia during 2010 and 2017. Angori et al (2019) studied the effect of factors before and post crises in the Eurozone during 2008 and 2014. Diko (2019) studied the Turkish banking sector and took panel data from 23 banks from 2003 and 2015.…”

Section: Literature Reviewmentioning

confidence: 99%

Determinants of Interest Margin in Pakistan: A Panel Data Analysis

Khan

Jalil

2020

Economies

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This paper explores the determinants of the net interest margin (NIM) using unbalanced panel data from 2003 to 2017. This paper’s objective is achieved by using a two-step system generalised method of moment (GMM) for estimation. Three different models are to account for two alternative measures of market competition. The empirical results of these models indicate that operating cost, profit tax, interest rate risk, Lerner index, national savings, money supply and the T-bill rate have significant positive associations with the NIM. Meanwhile, operational size, credit risk and the inflation rate negatively affect NIM. Furthermore, operating cost, taxation and the money supply are the main factors that influence the NIM. The present analysis provides a comprehensive view of the Lerner index, which is a better measure for capturing the degree of market power than the concentration measure (HHI). Managerial efficiency and risk aversion are bank-level factors that do not significantly determine NIM. Operating costs could be decreased by adopting new banking technologies. Therefore, higher competition, lower operating costs and restricted uncertain conditions in a macro environment, particularly in the money market, could reduce the NIM.

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Section: Literature Reviewmentioning

confidence: 99%

Determinants of Interest Margin in Pakistan: A Panel Data Analysis

Khan

Jalil

2020

Economies

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“…According to this definition, the net interest margin (NIM) is the difference between the income and expenditure of the bank interest divided by the total value of bank assets (Tarus et al, 2012). Increased competition drives banks to improve efficiency through lower net interest margins (Angori et al, 2019). Wide net interest margins make it difficult for banks to expand their functions as financial intermediary institutions, because low deposit rates reduce the motivation to save and vice versa, with high loan rates being a heavy burden for companies in investing (Claessens et al, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…/dx.doi.org/10.21511/bbs.15(4).2020.09 tio function model framework. Previous studies of the determinants of NIM ratios have been extensively developed, for example by Fungacova and Ponghyosan (2011) in Russia.…”

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confidence: 99%

Impact of internal and external factors on the net interest margin of banks in Indonesia

Endri

Marlina

Hurriyaturrohman

2020

Banks and Bank Systems

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This study aims to assess the impact of bank-specific factors and macroeconomic indicators on the net interest margin (NIM) of commercial banks in Indonesia. Data from Indonesian commercial banks are used. Data are collected from the banks’ annual reports and the Financial Services Authority (OJK) for the period 2008 to 2018. A panel data regression model is used to estimate the effect of bank-specific and macroeconomic factors. The results prove that the variables of Non-Performing Loans (NPL), Loan to Deposit Ratio (LDR), Return on Assets (ROA), Interest Rate (SBI), and Exchange Rate (FOREX) affect NIM. The exchange rate variable has a predominant effect, while the NPL factor has a less strong influence on NIM. The empirical evidence from this research is important for commercial banks in Indonesia to improve operational efficiency through NIM performance. Internal and external factors of a bank should be subject of attention of bank managers.

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“…The findings have implications pertaining to regulations and policy-making for the sustainability of the bank [69]. Especially, profitability and inflation can serve as the main indicators of future issues related to loan loss provision.…”

Section: Discussion and Policy Implicationsmentioning

confidence: 94%

Loan Loss Provision and Risk-Taking Behavior of Commercial Banks in Pakistan: A Dynamic GMM Approach

et al. 2019

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The paper analyzes the determinants of the loan loss provision (LLP) of 22 commercial banks in Pakistan from 2010 to 2017. The motive of the research is that LLP is a measure of credit risk as a proxy for bank risk-taking behavior profits and banks’ sustainability. Especially after the occurrence of a global financial crisis. The quantitative research method of data collection from Bureau Van Dijk’s BankFocus portal and the World Bank’s World Development Indicators. Other than considering specific bank variables such as capital adequacy ratio, return on average equity, and government securities, the effects of macroeconomic variable inflation and lending interest rates are explicitly studied. The model of pooled ordinary least squares (POLS), fixed effect (FE), panel corrected standard error (PCSE), and panel data estimation in the form of a general method of moments (GMM) two-step system is used to find the risk-taking behavior of banks in Pakistan. The results obtained by the use of inflation (INF) as an instrumental variable of LLP are highly dependable with a negative impact on loan loss provision. Lending interest rate (LIR) has a positive and significant relationship with LLP and contribute in the study of macroeconomic variables for bank risk-taking, excessive amount of interest rate was not beneficial for banks to earn profits especially during the economic crises. Return on average equity (ROAE) significantly moderates LLP with a negative interaction and helped the bank with profitable operations and save bank from solvency. Capital adequacy ratio (CAR) and government securities (GOV) are insignificant to LLP. The result is robust by measure of endogeneity, and highlights the important role of commercial banks’ sustainability to explain risk-taking behavior in Pakistan with the intention to increase profits after the occurrence of financial crises. The study further contributes to future research on managerial policy and decision making. In summary, the paper on loan loss provision has the capacity to forecast commercial banks’ credit risk for risk-taking in an emerging country.

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Determinants of Banks’ Net Interest Margin: Evidence from the Euro Area during the Crisis and Post-Crisis Period

Cited by 54 publications

References 48 publications

Determinants of Interest Margin in Pakistan: A Panel Data Analysis

Determinants of Interest Margin in Pakistan: A Panel Data Analysis

Impact of internal and external factors on the net interest margin of banks in Indonesia

Loan Loss Provision and Risk-Taking Behavior of Commercial Banks in Pakistan: A Dynamic GMM Approach

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