Net Interest Income

AAA

DEFINITION of 'Net Interest Income'

The difference between the revenue that is generated from a bank's assets and the expenses associated with paying out its liabilities. A typical bank's assets consist of all forms of personal and commercial loans, mortgages and securities. The liabilities are, of course, the customer deposits. The excess revenue that is generated from the spread between interest paid out on deposits and interest earned on assets is the net interest income.

INVESTOPEDIA EXPLAINS 'Net Interest Income'

The net interest income of some banks is more sensitive to changes in interest rates than others. This can vary according to several factors, such as the type of assets and liabilities that are held. Banks with variable rate assets and liabilities will obviously be more vulnerable to changes in interest rates than those with fixed-rate assets. Banks with liabilities that reprice more often or quicker than its assets will also be affected by interest rate changes.

RELATED TERMS
  1. Income

    Money that an individual or business receives in exchange for ...
  2. Interest

    1. The charge for the privilege of borrowing money, typically ...
  3. Bond

    A debt investment in which an investor loans money to an entity ...
  4. Put Bond

    A bond that allows the holder to force the issuer to repurchase ...
  5. Bond ETF

    A type of exchange-traded fund (ETF) that exclusively invests ...
  6. LIBOR Scandal

    A scandal in which financial institutions were accused of fixing ...
Related Articles
  1. Forces Behind Interest Rates
    Economics

    Forces Behind Interest Rates

  2. Understanding Credit Card Interest
    Retirement

    Understanding Credit Card Interest

  3. Using Open Interest To Find Bull/Bear ...
    Options & Futures

    Using Open Interest To Find Bull/Bear ...

  4. Intro To Open Interest In The Futures ...
    Options & Futures

    Intro To Open Interest In The Futures ...

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center