Determinants Of Bank Net Interest Margin

As a key index to commercial banks’ business performance,net interest margin is at great risk of declining.Banks in China are over dependent on interest revenue shown from the structure data of operating income.By analyzing the 16 listed banks in A-share market,we found that net interest margin has a mean value of 2.5% in recent 3 years.And it is much higher than other Global systemically important banks in Japan,Britain and America.G-SIBs in China also have a better quality of asset management,with lower non-performing loan and cost to income ratio.By using the panel data of 16 listed banks in A-share market from 2007H2 to 2016H1(downloaded from Bankscope and Wind),we aim to analysis the determinants of banks’ net interest margin in mainland China.The results showed that loan volume,ratio of equity to total assets and benchmark interest spread has a strong positive relation with the net interest margin(short for nim).Cost to income ratio,trend of stock market and the volume of M1 supply will bring negative impact to the nim.Base on the research as mentioned,we choose Bank of China(short for BOC)as the object for case study.Combine BOC’s daily business performance with regression results,we give 3 suggestions to increase the net interest margin: 1.keep smoothly growing and optimize the structure of loan volume.2.rigid control over loss of asset impairment to prevent the increasing of credit cost.3.make clear strategy to build digital operating system in order to realize the precisely connection between client and bank product.