What bank ratio is (interest income minus interest expense) divided by average earning assets?

The bank ratio equal to (interest income minus interest expense) divided by average earning assets is net interest margin.

Net interest margin, or NIM, expresses a bank’s net interest income as a percentage of the assets generating that income. If interest income is $6 million, interest expense is $3 million, and average earning assets are $100 million, NIM is 3%. Loans and investment securities commonly make up much of the earning-asset base.

NIM is not the same as net interest spread. A spread compares average rates earned on assets with average rates paid on interest-bearing liabilities; NIM measures the resulting net interest income against the asset base. Differences in funding mix, non-interest-bearing deposits, and equity can make the two figures diverge.

A falling NIM can reflect higher deposit costs, weaker loan yields, or a shift toward lower-yield assets. Credit quality matters too: when loans stop generating collectible interest, net interest income can decline even if the bank’s loan book remains large.