Interest margin is the interest difference between loan interest income and deposit interest expense, which is the bank's profit and the main income after deducting business expenses.
The bank's profit mainly includes the interest difference between loan interest income and deposit interest expenditure, which is the bank's profit after deducting operating expenses, which is the main income of the bank. The calculation formula of bank profit is: profit = loan interest income-deposit interest expense-business expenses.
The bank's profit also includes other income, such as the price difference income from buying and selling securities, the commission income from buying and selling foreign exchange, and the exchange rate risk income from buying and selling foreign exchange. In China, because banks are national financial institutions, bank profits are generally turned over to the state finance according to regulations.
The calculation formula of the spread is as follows:
1. Evaluating the performance of banks or financial institutions: By calculating the spread, we can know the profitability of banks or financial institutions in a specific period. This helps to evaluate its overall performance and provide important financial information for shareholders, investors and regulators.
2. Comparing the profitability of different banks or financial institutions: Using the spread calculation formula, we can compare the profitability of different banks or financial institutions in the same period. This helps investors to make more informed decisions when choosing investment targets.
3. Analysis of bank business strategy: By analyzing the trend of interest margin, we can understand the bank's business strategy in different periods. For example, if the interest margin increases, it may mean that banks are adopting a more active lending strategy, or the cost of deposits has decreased.
4. Forecast the future profit trend: By analyzing the historical spread data, the future profit trend of banks or financial institutions can be predicted. This helps investors, analysts and bank management to make more accurate financial plans and decisions.
5. Assess the risk management ability of banks: Interest spread is one of the main sources of income for banks to bear risks. By analyzing the change of interest margin, we can evaluate the risk management ability of banks in different market environments. For example, when the market fluctuates greatly, the interest margin of banks may be affected, which may mean that banks need to strengthen risk management measures.