Thursday, February 8, 2024

Banks have been reporting their Q4 earnings at a brisk pace lately, and already we have more than 260 earnings reports to study — and as much as everyone loves to talk about commercial real estate lately (including Calcbench in a recent post) today we want to talk about net interest margin. 

Net interest margin is the spread between the interest rate it pays on customer deposits and the interest rate it receives from loans. For example, when a bank extends loans at 8 percent and pays 5 percent to depositors, the net interest margin is 3 percent. 

So what have net interest margins been doing lately? See Figure 1, below.

As you can see, net interest margin spiked in 2022, as banks raised their rates on new loans (keeping pace with the Federal Reserve’s punishing rate increases that year) but held rates on deposits low. 

By late 2023, however, the Fed had stopped its rate hikes. Loan rates stabilized, and net interest margins narrowed to an average of 3.22 percent reported in Q4 2023— almost exactly where they were at the start of 2021, 3.23 percent. 

So, what does this mean? Are depositors getting wiser and demanding better rates on their savings accounts? Are banks responding to that pressure by raising depositor rates, which therefore narrows the net margin? 

You can answer those questions if you know where to look in the earnings release and the quarterly filings. Calcbench specializes in data that can be found deep within both: average interest rates, deposit volumes, loan performance metrics, and more. (We have a report on banks’ non-performing assets coming soon, for example.)

For the curious, we offer Figure 2, below, which shows the banks with the largest and smallest net interest margins, and how those margins have fluctuated over the last two years.

Premium Calcbench subscribers can also see our spreadsheet detailing interest rate spreads for the entire 260+ group we studied, and lots of other data besides that. Email us at if you’d like to know more.

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