Net interest income
What is net interest income?
The difference between the income a bank earns from interest and the expenses (including interest payments) associated with its liabilities.
Where have you heard about net interest income?
Net interest income (NII) is often quoted in the financial news as a measure of a bank’s performance.
What you need to know about net interest income.
Banks generate revenue from interest earned on their assets, such as mortgage loans, commercial and personal loans and investment securities. They also have expenses, including interest payments, on customer deposits (liabilities). The difference between the totals of these figures is the NII.
The type of assets and liabilities a bank holds will make it more or less sensitive to changes in interest rates. Typically banks with variable rate assets and liabilities are more vulnerable to interest rate change. If the net interest spread falls then a rise in interest rates on liabilities could lead to a drop in NII.