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Net Interest Income

Net interest income is the difference between the interest earned by a financial institution on its loans and investments and the interest it pays on its deposits or borrowings. It is a key measure of a bank’s profitability, as it reflects the income generated from its primary lending activities. Net interest income is impacted by interest rate changes, the spread between lending and borrowing rates, and the overall loan portfolio size.

Example

A bank earns $50 million in interest from loans and pays $20 million in interest on deposits, resulting in a net interest income of $30 million.

Key points

• The difference between the interest earned on loans and investments and the interest paid on deposits or borrowings.

• A key measure of a bank’s profitability and performance.

• Influenced by interest rates and the spread between lending and borrowing.

Quick Answers to Curious Questions

Net interest income is the difference between the interest earned on loans and investments and the interest paid on deposits or borrowings.

It reflects the profitability of a bank’s lending and borrowing activities and is a key measure of financial performance.

Changes in interest rates can affect the spread between lending and borrowing rates, influencing the bank’s net interest income.

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