Read a bank’s net interest margin

Loan rates rise. Why could a bank’s net interest margin still fall?

Funding costs can rise faster than interest income. Margin tracks the net interest earned on the average earning asset base.

Net interest margin = (interest income − interest expense) ÷ average interest-earning assets

(₹92 crore − ₹48 crore) ÷ ₹1,100 crore = 4.0%.

A fictional bank earns ₹92 crore interest and pays ₹48 crore over a year, with ₹1,100 crore average earning assets. NIM is 4.0%.

(₹92 crore − ₹48 crore) ÷ ₹1,100 crore = 4.0%.

Funding expense rises to ₹59 crore with other inputs fixed. What is annual NIM?