The Relationship between net interest margin and non-interest income and their impact on bank perfomance
This paper examines about the relationship between net interest margin and non-interest income and their impact on bank performance. A balanced panel data of the 29 public-listed banks in Indonesia is employed for this study. Previous studies with various results in different countries have encouraged the author to do the similar research in Indonesian banking industry. A statistically significant and negative relationship is found between net interest margin and non-interest income. This indicates that the involvement of banks in generating fee-based income has increased to offset the decline in net-interest earning. Net interest margin has a positive and significant correlation with risk-adjusted profitability, suggesting that the ability of bank?s management in managing its earning asset is essential to increase profit. However, there is no obvious diversification benefit on banks? increasing involvement in non-traditional activities.
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