#### How to Calculate Net Interest Margin in Excel

In this Excel tutorial you learn how to calculate net interest margin in Excel.

Net interest margin (NIM) is a key indicator of the profitability and efficiency of a financial institution. It measures the difference between the interest income generated from lending activities and the interest expense paid on deposits and borrowings, relative to the average earning assets.

Average earning assets are the total assets that generate interest income, such as loans, mortgages, securities, etc. The higher the NIM, the more profitable the institution is at investing its funds and managing its interest rate risk.

To calculate NIM in Excel, you need to have the following data:

– Interest income (IR): The total amount of interest earned from lending activities in a given period, such as a quarter or a year.

– Interest expense (IE): The total amount of interest paid on deposits and borrowings in the same period.

– Average earning assets (AEA): The average value of earning assets over the period. This can be calculated by adding the beginning and ending balances of earning assets and dividing by two.

The formula for NIM is:

NIM = (IR – IE) / AEA

To apply this formula in Excel, you can use the following steps:

– Enter the data for IR, IE and AEA in separate cells, such as B2, B3 and B4.

– In another cell, such as B5, enter the formula = (B2 – B3) / B4

– Format the cell as a percentage with two decimal places.

The result is the NIM for the given period. For example, if IR is $1,000,000, IE is $200,000 and AEA is $10,000,000, then NIM is 8%.

NIM can be used to compare the performance of different financial institutions or different periods of time. However, it should be noted that NIM can vary depending on the type and mix of earning assets, the interest rate environment, and the cost of funds. Therefore, it is important to consider other factors and ratios when evaluating the financial health and efficiency of a financial institution.

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