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Determinants of Banks’ Net Interest Margins in Honduras

Author

Listed:
  • Koffie Nassar

    (International Monetary Fund, U.S.A.)

  • Edder Martinez

    (Comisión Nacional de Bancos y Seguros, Honduras)

  • Anabel Pineda

    (Comisión Nacional de Bancos y Seguros, Honduras)

Abstract

This paper analyzes the determinants of banks’ net interest margins in Honduras during the years 1998 to 2013 – a period characterized by increasing banks’ net interest margins, foreign bank participation and consolidation. In line with findings in the previous literature, we find that operating costs are the most important drivers of banks’ net interest margins. We also find that competition among banks has led to higher concentration and that funding by parent banks positively impacts foreign banks’ net interest margins. Together, these results suggest that banks, particularly foreign banks, are under pressure to consolidate and reduce operating costs in order to offer competitive interest margins. We conclude that further structural reforms and consolidation may lower banks’ net interest margins.

Suggested Citation

  • Koffie Nassar & Edder Martinez & Anabel Pineda, 2017. "Determinants of Banks’ Net Interest Margins in Honduras," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(7), pages 5-27, May.
    • Handle: RePEc:sgm:jbfeuw:v:1:y:2017:i:7:p:5-27
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    References listed on IDEAS

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    More about this item

    Keywords

    Banks’ interest margins; Commercial banks; Panel corrected standard errors (PCSE).;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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