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Macroeconomic, Market and Bank-Specific Determinants of the Net Interest Margin in Austria

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Author Info

  • Ulrich Gunter

    ()
    (MODUL University Vienna, Department of Tourism and Service Management)

  • Gerald Krenn

    ()
    (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division)

  • Michael Sigmund

    ()
    (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division)

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    Abstract

    The objective of this article is to identify key determinants of the net interest margin (NIM) in the Austrian banking sector. In Austria, the NIM is one of the most important income drivers of banks given the importance of relationship banking, where interest income dominates other sources of revenue. However, the NIM differs substantially among Austrian banks. Drawing on a unique supervisory dataset for the Austrian banking sector of around 42,000 observations between the first quarter of 1996 and the second quarter of 2012, we analyze under which circumstances a bank has a relatively high or low NIM. We contribute to the empirical literature on the NIM by factoring in a bank’s business model in terms of its balance sheet structure and by accounting for the financial crisis from the third quarter of 2007 onward. Our estimation results suggest that not only the determinants identified in the existing empirical literature (different types of non-interest income and expenses, various risk measures, competition, macroeconomic environment) have a significant influence on the NIM, but also our two innovations (balance sheet structure, financial crisis).

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    File URL: http://www.oenb.at/dms/oenb/Publikationen/Finanzmarkt/Financial-Stability-Report/2013/Financial-Stability-Report-25/chapters/fsr_25_report_special_topics4_tcm16-256590.pdf
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    Bibliographic Info

    Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Financial Stability Report.

    Volume (Year): (2013)
    Issue (Month): 25 ()
    Pages: 87-101

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    Handle: RePEc:onb:oenbfs:y:2013:i:25:b:4

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    Related research

    Keywords: Net interest margin; balance sheet structure; panel estimation;

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    References

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    1. Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LP, vol. 7(3), pages 281-312, September.
    2. Delis, Manthos D & Kouretas, Georgios, 2010. "Interest rates and bank risk-taking," MPRA Paper 20132, University Library of Munich, Germany.
    3. Nicolas Albacete & Pirmin Fessler & Martin Schürz, 2012. "Risk Buffer Profiles of Foreign Currency Mortgage Holders," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 23, pages 58-71.
    4. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
    5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
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