what is net interest margin 
net interest margin nim is the net interest income a lender earns from credit products like loans and mortgages minus the interest it pays to holders of savings accounts and certificates of deposit cds expressed as a percentage the nim shows how likely a bank or investment firm is to thrive over the long haul this metric helps prospective investors determine whether or not to invest in a financial services firm by showing its interest income versus their interest expenses simply put a positive net interest margin suggests that an entity operates profitably while a negative figure implies investment inefficiency in the latter scenario a firm may take corrective action by applying funds toward outstanding debt or shifting those assets towards more profitable investments investopedia crea taylornet interest margin formulanet interest margin may be calculated by the following formula net interest margin ir ie average earning assets where ir investment returns ie interest expenses begin aligned text net interest margin frac text ir text ie text average earning assets textbf where text ir text investment returns text ie text interest expenses end aligned net interest margin average earning assetsir ie where ir investment returnsie interest expenses consider the following fictitious example assume company abc boasts a return on investment of 1 000 000 an interest expense of 2 000 000 and average earning assets of 10 000 000 in this scenario abc s net interest margin totals 10 indicating that it lost more money due to interest expenses than it earned from its investments this firm would likely fare better if it used its investment funds to pay off debts rather than making this investment the average net interest margin for all fdic insured institutions as of march 31 2024 1