# Net Interest Margin

*Banking & Payments — Finicade finance glossary*

Net interest margin is the gap between what a bank earns on assets and pays on funding, as a percentage of earning assets. It's the core profitability measure of a lender. Rising rates usually widen it at first, because loans reprice faster than deposits, then compress it as depositors demand more — a lag that makes the first year of a hiking cycle unusually profitable for banks.

**Formula:** `NIM = (Interest income − Interest expense) ÷ Average earning assets`

**Also known as:** NIM, interest spread

**Related terms:** [Deposit Beta](https://finicade.com/glossary/deposit-beta), [Commercial Bank](https://finicade.com/glossary/commercial-bank), [Interest Rate Risk](https://finicade.com/glossary/interest-rate-risk), [Loan-to-Deposit Ratio](https://finicade.com/glossary/loan-to-deposit-ratio), [Yield Curve](https://finicade.com/glossary/yield-curve)

Source: https://finicade.com/glossary/net-interest-margin