Earning
The net interest margin (NIM) measures how large the
spread between interest revenues and interest costs that
management has been able to achieve by close control
over earning assets and the pursuit of the cheapest
sources of funding (Rose et al., 2006).
NIM has been treated as an extremely important
measure to the bank and its minimum value for a healthy
bank is considered about 4%. A small change in the
interest margin has a huge impact on profitability. Higher
NIM is associated with profitable banks by maintaining
good asset quality. The public sector banks in Nepal are
entirely different from joint-venture banks and private
banks. Table 1, column 6 indicates that the domestic
banks had higher average NIM (26.65%) than that of
public banks (12.51%) and joint venture banks (21.30%).
It means domestic banks were able to maintain good
asset quality.
While comparing the individual banks, the result was
very different from the average values. Though ADBL is
public sector bank, it was occupied first position with the
highest interest margin of 5.61% while SBL, a domestic
private bank, was in the last position with lowest interest
margin of 1.90%.
The interest margin of EBL, a joint venture bank, was
4.75% and ranked in second position. Among the all
commercial banks only ADBL, NABIL, EBL and LBL were
maintained minimum level. It seems the profitability of the
banks in Nepal was not so satisfactory