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

Oesterreichische Nationalbank Financial Stability Report, Vol. 25, June 2013

16 Pages Posted: 15 Jul 2013

See all articles by Ulrich Gunter

Ulrich Gunter

MODUL University Vienna

Gerald Krenn

Oesterreichische Nationalbank (OeNB)

Michael Sigmund

Oesterreichische Nationalbank (OeNB)

Date Written: July 15, 2013

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).

Keywords: net interest margin, balance sheet structure, panel estimation

JEL Classification: E43, G21, D40, L11

Suggested Citation

Gunter, Ulrich and Krenn, Gerald and Sigmund, Michael, Macroeconomic, Market and Bank-Specific Determinants of the Net Interest Margin in Austria (July 15, 2013). Oesterreichische Nationalbank Financial Stability Report, Vol. 25, June 2013, Available at SSRN: https://ssrn.com/abstract=2293794

Ulrich Gunter

MODUL University Vienna ( email )

Am Kahlenberg 1
Vienna, A-1190
Austria

Gerald Krenn

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Michael Sigmund (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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