Net interest income and the margin
Yields, deposit betas, NII and NIM.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: net interest income and the margin.Updated 30 October 2026
What it does
The largest line in most banks’ income. Every asset yield and every deposit rate is priced from the policy rate: a loan book reprices by its beta plus a spread, a deposit pays its beta times the policy rate plus a spread, never below nil. Interest is earned and paid on average balances. Net interest income is interest earned less interest paid, and the net interest margin is that over average interest-earning assets. The deposit betas are the judgement that matters most: they decide how much of a rate move the bank keeps.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, row 17: Central bank policy rate, base case
- Assumptions, rows 28–33: Mortgages: repricing beta to the policy rate, Mortgages: spread over beta x policy rate, Consumer loans and cards: repricing beta to the policy rate, Consumer loans and cards: spread over beta x policy rate…
- Assumptions, rows 54–60: Current accounts: deposit beta, Current accounts: spread over beta x policy rate, Savings accounts: deposit beta, Savings accounts: spread over beta x policy rate…
- Net Interest Income, rows 6–14: Policy rate, selected scenario, Mortgages: yield, Consumer loans and cards: yield, Business and commercial loans: yield…
- Net Interest Income, rows 17–23: Mortgages, Consumer loans and cards, Business and commercial loans, Interest income on loans…
- Net Interest Income, rows 26–32: Current accounts, Savings accounts, Term deposits, Interest on deposits…
- Net Interest Income, rows 35–39: Average interest-earning assets, Net interest margin (NIM), Yield on interest-earning assets, Cost of deposits…
What a reviewer looks for
- A single margin applied to all assets, so a change in rates or mix does nothing.
- Interest on closing balances, which overstates income in a growing year.
- Deposit rates that fall below nil, or move one for one with the policy rate.
Learn it, then build it
Vocabulary: Basis Points (bps).