Net Interest Spread Calculator: Measure Bank Profitability Easily
Use the Net Interest Spread Calculator by entering your asset yield and funding cost, then subtracting the two rates. For example, 7.25 % income minus 2.15 % expense equals a 5.10 % spread. U.S. banks posted an average net interest margin of 3.13 % in 2022 (FDIC Quarterly, 2023).
Net Interest Spread Calculator
Net Interest Spread:
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How to use the tool
Enter Interest Income Rate (%)
• Example A: 7.25 %
• Example B: 9.40 %
Enter Interest Expense Rate (%)
• Example A: 2.15 %
• Example B: 4.65 %
Select “Calculate” to display your spread instantly.
Formula
$$\text{Net Interest Spread}= \text{Interest Income Rate} – \text{Interest Expense Rate}$$
Worked examples
Example A: $$7.25\% – 2.15\% = 5.10\%$$
Example B: $$9.40\% – 4.65\% = 4.75\%$$
Quick Facts
Average U.S. bank net interest margin: 3.13 % in 2022 (FDIC Quarterly Report, 2023).
Fed funds target range: 5.25 – 5.50 % as of Oct 2023 (Federal Reserve, 2023).
Net interest income for FDIC-insured banks: $275 billion 2022 (FDIC Quarterly, 2023).
Basel III requires NSFR ≥ 100 % for funding stability (BIS, 2019).
FAQ
What is net interest spread?
The spread is the difference between the yield on earning assets and the cost of funding those assets (FDIC, 2023).
How do you calculate it?
Subtract the average interest rate paid on liabilities from the average rate earned on assets—both expressed in annual percentage terms.
Why does the spread matter to banks?
A larger spread directly lifts net interest income, the main profit driver for most commercial banks (FDIC, 2023).
How can your bank improve its spread?
Raise loan yields, lower deposit costs, shift toward higher-yield assets, or hedge interest-rate risk (McKinsey Global Banking Review, 2022).
What is a healthy benchmark spread?
Spreads near the 10-year industry median of 3 % indicate efficient pricing relative to peers (FDIC Historical Statistics, 2023).
How does a rate hike affect the spread?
Asset yields usually reprice faster than deposit costs, widening spreads during the initial hiking cycle (Federal Reserve, 2022).
Net interest spread vs. net interest margin?
Spread compares rates; margin divides net interest income by average earning assets, reflecting both rate and volume effects (Investopedia, 2023).
How often should you run the calculator?
Update at least monthly or whenever your loan or deposit pricing changes to capture current profitability.
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