Net Interest Income

All firms can divide the balance sheet into assets and liabilities. For banks the assets are commercial and personal loans, mortgages, construction loans and securities. The liabilities are deposits from customers. The net interest income (NII) is then the difference between the revenues on the assets and the cost of servicing the liabilities. Notice that both cash flows are not interest payments. In other words, the NII is the difference between the interest payments to the bank on loans and the interest payments by the bank to the customers on the deposits.

NII = {Interest payments on assets} - {Interest payments on liablities}

Depending on the banks specific portfolio of assets and liabilities (fixed or floating rate) the banks NII can be more or less sensitive to changes in interest rates. If the banks liabilities reprice faster than its assets it is said to be liability sensitive. Further, the bank is asset sensitive if the liabilities reprice more slowly than the assets. The exposure of NII to interest rate changes can be measured by the dollar maturity gap (DMG), which is the difference between the assets that reprice and the liabilities that reprice within a period of time.

ee also

Net interest spread

Net interest margin


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Net interest income — (NII) is the difference between revenues generated by interest bearing assets and the cost of servicing (interest burdened) liabilities. For banks, the assets typically include commercial and personal loans, mortgages, construction loans and… …   Wikipedia

  • Net Interest Income — The difference between the revenue that is generated from a bank s assets and the expenses associated with paying out its liabilities. A typical bank s assets consist of all forms of personal and commercial loans, mortgages and securities. The… …   Investment dictionary

  • Net interest income —   Interest income less tax …   International financial encyclopaedia

  • Net interest income to assets ratio —   The ratio of net interest income to total year end assets …   International financial encyclopaedia

  • Net Investment Income — Income received from investment assets (before taxes) such as bonds, stocks, mutual funds, loans and other investments (less related expenses). The individual tax rate on net investment income depends on whether it is interest income, dividend… …   Investment dictionary

  • net operating income — UK US noun [U] ACCOUNTING, FINANCE ► a company s profit after the costs involved in its daily business are subtracted, but before tax and interest on borrowing are subtracted: »The organization finished its fiscal year with about $20 million in… …   Financial and business terms

  • net operating income — Income generated from the operations of a business reduced by operating expenses. Expenses not considered operating expenses include: interest, depreciation, and income taxes …   Black's law dictionary

  • net operating income — noun Income after deducting operating expenses but before deducting for income taxes, interest, and depreciation and amortization. Syn: NOI, EBITDA …   Wiktionary

  • net operating income — Fin the amount by which income exceeds expenses, before considering taxes and interest …   The ultimate business dictionary

  • Net interest margin — (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders(for example, deposits), relative to the amount of their (interest earning)… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.