Net Interest Margin measures how much interest income a bank generates from its average earning assets, after paying interest cost. So the formula is (Interest Income - Interest Cost)/interest-earning assets.
Net Income Margin measures the % of all Revenue that is turned into Net Income. So the formula is (Revenue - all expenses)/Revenue.
Both metrics sound similar, but they measure different things.
Thank you for this writing. A quick question, how is it possible that their Net Income Margin of 40% is double their Net Interest Margin of 19.5%?
Hey Kristof, great question.
Net Interest Margin measures how much interest income a bank generates from its average earning assets, after paying interest cost. So the formula is (Interest Income - Interest Cost)/interest-earning assets.
Net Income Margin measures the % of all Revenue that is turned into Net Income. So the formula is (Revenue - all expenses)/Revenue.
Both metrics sound similar, but they measure different things.