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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Net interest margin

What is net interest margin, and what moves it?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Net interest margin is the difference between what a bank earns on its loans and other interest-bearing assets and what it pays for its deposits and borrowings, expressed against those assets. It is the engine of a commercial bank's earnings, and it moves when rates change faster on one side of the balance sheet than the other: a bank whose loans reprice quickly while its deposits lag gains from a rate rise, and one with fixed-rate loans funded by floating deposits loses. Reading a bank means reading which side reprices first — the repricing gap — and how much of a rate change its depositors are passed.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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