Analysis of the determinants of banks' net interest margin

[A. N. Todorović]

[20], 296 listova

Biografija autora: list 293. Bibliografija: list. 282-292.

Global banking

In conditions of increased macroeconomic instability, rising competitive pressures and tightening regulatory requirements, banking systems operate in an environment in which the sustainability of profitability depends on the ability to efficiently manage risks and the costs of financial intermediation. Net interest margin, defined as the difference between interest income and interest expenses relative to total assets, represents a key aggregate indicator of banking sector profitability and an integral measure of the “price” of financial intermediation. For this reason, the analysis of its determinants is of particular importance in contemporary European financial systems. The objective of this doctoral dissertation is to identify, systematize, and empirically verify the key determinants of net interest margin in the banking sectors of European countries. The research is grounded in theoretical models explaining the formation of interest margins, including the monopoly model and the dealership model, as well as concepts of market power. The theoretical part of the study enabled the classification of net interest margin determinants into three groups. Macroeconomic determinants include inflation, gross domestic product, the level of interest rates, the exchange rate, and the unemployment rate. Bank-specific determinants comprise credit risk, liquidity, bank size, concentration, competition, capitalization, and operational efficiency. Institutional determinants refer to regulatory requirements, reserve requirement policy, deposit insurance systems, barriers to entry into the banking market, and institutional quality, including rule of law, control of corruption, and political stability. The empirical analysis was conducted using panel data covering 36 European countries over the period 2008–2024. Static and dynamic panel models were applied, enabling the examination of both the direct effects of determinants and the persistence of net interest margins. The results indicate that macroeconomic conditions, particularly inflation and the level of interest rates, have a statistically significant impact on net interest margins; that credit risk, capitalization, and the structure of the banking market significantly influence margin formation; that net interest margins exhibit pronounced persistence; and that there are structural differences in the effects of individual determinants between euro area countries, non-euro area countries, and EU candidate countries. Theoretical and empirical findings demonstrate that net interest margin is not a uniform category across European banking systems, but rather the result of a complex interaction between the macroeconomic environment, internal characteristics of the banking sector, and the institutional framework. The integrated results provide theoretical and practical implications for monetary authorities, regulatory institutions, and bank management, with the aim of enhancing stability, efficiency, and sustainable profitability of banking systems within the process of European economic integration.

neto kamatna marža, makroekonomske determinante, bankarske determinante, institucionalne determinante, panel analiza, evropske zemlje

net interest margin, macroeconomic determinants, bank-specific determinants, institutional determinants, panel data analysis, European countries

336.71:658.14(4)(043.3) 336.71:658.155(4)(043.3)

S 181

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