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Determinants of bank net interest margins in Southeast Asia

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  • Jude S. Doliente

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

This paper investigates the determinants of net interest margins (NIM) of banks in four Southeast Asian countries using the dealer model ( Ho and Saunders, The Journal of Financial and Quantitative Analysis , 16 (4), pp 581-600, 1981 ) and by running two-step regressions. Results of the first regression indicate that the region's NIM are partially explained by bank-specific factors namely operating expenses, capital, loan quality, collateral and liquid assets. Second step regression results show that while NIM manifest sensitivity to changes in short-term interest rates, they are still largely explained by the non-competitive structure of the region's banking systems. Furthermore, there is evidence that the NIM declined after 1997 thus reflecting the profit squeeze experienced by the region's banks in the aftermath of the Asian currency and banking crises.

Suggested Citation

  • Jude S. Doliente, 2005. "Determinants of bank net interest margins in Southeast Asia," Post-Print hal-00828474, HAL.
    • Handle: RePEc:hal:journl:hal-00828474
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    Cited by:

    1. Kasman, Adnan & Tunc, Gokce & Vardar, Gulin & Okan, Berna, 2010. "Consolidation and commercial bank net interest margins: Evidence from the old and new European Union members and candidate countries," Economic Modelling, Elsevier, vol. 27(3), pages 648-655, May.
    2. Nguyen Duy Suu & Thu-Quang Luu & Kim-Hung Pho & Michael McAleer, 2020. "Net Interest Marginof Commercial Banks in Vietnam," Advances in Decision Sciences, Asia University, Taiwan, vol. 24(1), pages 1-27, March.
    3. Li Xian Liu & Milind Sathye, 2019. "Bank Interest Rate Margin, Portfolio Composition and Institutional Constraints," JRFM, MDPI, vol. 12(3), pages 1-21, July.
    4. Stapah @ Salleh, Maisyarah & Possumah, Bayu Taufiq & Ahmat, Nizam, 2021. "The Impact of Financing Contracts on the Profitability of Islamic Banks," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(3), pages 149-164.
    5. Arezoo GHASEMI, & Malihe ROSTAMI, 2016. "Determinants Of Interest Rate Spread In Banking Industry," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(1), pages 1-46, January.
    6. Stef, Nicolae & Dimelis, Sophia, 2020. "Bankruptcy regime and the banking system," Economic Modelling, Elsevier, vol. 87(C), pages 480-495.
    7. Parmendra Sharma & Neelesh Gounder, 2011. "Determinants of bank net interest margins in a Small Island Developing Economy: Panel Evidence from Fiji," Discussion Papers in Finance finance:201112, Griffith University, Department of Accounting, Finance and Economics.
    8. Mohammed Mizanur Rahman & Mahfuzur Rahman & Md. Abdul Kaium Masud, 2023. "Determinants of the Cost of Financial Intermediation: Evidence from Emerging Economies," IJFS, MDPI, vol. 11(1), pages 1-32, January.
    9. Serhat Yuksel & Sinemis Zengin, 2017. "Influencing Factors of Net Interest Margin in Turkish Banking Sector," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 178-191.
    10. Konstantins Benkovskis & Olegs Tkacevs & Karlis Vilerts, 2021. "Interest Rate Spreads in the Baltics and the Rest of the Euro Area: Understanding the Factors behind the Differences," Discussion Papers 2021/02, Latvijas Banka.
    11. Zhang, Minghui & He, Jianmin & Li, Shouwei, 2018. "Interbank lending, network structure and default risk contagion," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 493(C), pages 203-209.
    12. Ijaz Hussain, 2014. "Banking industry concentration and net interest margins (NIMs) in Pakistan," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 15(2), pages 384-402, April.

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