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 investment securities. The liabilities consist primarily of customers' deposits. NII is the difference between (a) interest payments the bank receives on loans outstanding and (b) interest payments the bank makes to customers on their deposits.^^
- NII = (interest payments on assets) − (interest payments on liabilities)
Depending on a bank's specific assets and liabilities (e.g., fixed or floating rate), NII may be more or less sensitive to changes in interest rates. If the bank's liabilities reprice faster than its assets, then it is said to be "liability-sensitive." Further, the bank is asset-sensitive if its liabilities reprice more slowly than its assets in a changing interest-rate environment. The exposure of NII to changes in interest rates can be measured by the dollar maturity gap (DMG), which is the difference between the dollar amount of assets that reprice and the dollar amount of liabilities that reprice within a given time period
Read more about Net Interest Income: See Also
Famous quotes containing the words net, interest and/or income:
“Hard times accounted in large part for the fact that the exposition was a financial disappointment in its first year, but Sally Rand and her fan dancers accomplished what applied science had failed to do, and the exposition closed in 1934 with a net profit, which was donated to participating cultural institutions, excluding Sally Rand.”
—For the State of Illinois, U.S. public relief program (1935-1943)
“Take it all around, I was feeling ruther comfortable, on accounts of taking all this trouble for that gang, for not many would a done it. I wished the widow knowed about it. I judged she would be proud of me for helping these rapscallions, because rapscallions and dead beats is the kind the widow and good people takes the most interest in.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)
“Some rough political choices lie ahead. Should affirmative action be retained? Should preference be given to people on the basis of income rather than race? Should the system be—and can it be—scrapped altogether?”
—David K. Shipler (b. 1942)