Understanding your Net Interest Margin (NIM)

With the strategic ALM objectives of bank balance sheet management nowadays to the fore, being aware of the expected impact on NIM following multi-scenario changes in rates, spreads and product types, both short- and long-term, becomes ever more important. The link below presents a vanilla case study for NIM sensitivity analysis in Excel format, written by my co-author Chris Westcott, and is extracted from the accompanying website for "Anthology: Past, Present and Future Principles of Banking and Finance" (Wiley 2018). Of course in practice there are a lot more scenarios to model, but this worksheet is an excellent demonstration of the fundamentals.

by Professor Moorad Choudhry & Chris Westcott