Title: Determinants of Net Interest Margin in Banking in 5 Southeast Asian Countries

Authors: MADE GITANADYA AYU ARYANI

Item Type: Thesis (Thesis)

Affiliations: Master of Management Science Study Program, Faculty of Economics and Business, Universitas Airlangga , Surabaya, Indonesia

Publisher: Universitas Airlangga

Abstract

Banking in Southeast Asia has different characteristics across countries, impacting the Net Interest Margin (NIM). Banks in Indonesia enjoyed an NIM of 5.4%, while Singapore's was only 1.4% in the same year. Therefore, this study aims to determine the factors influencing NIM determination in banks in five Southeast Asian countries: Indonesia, Malaysia, Thailand, Singapore, and the Philippines. This study classifies the various determinants affecting NIM into three main factors: bank-specific factors consisting of relative size, credit risk, liquidity, capital adequacy, operational risk, and diversification. Furthermore, this study also used industry concentration and macroeconomic factors consisting of short-term interest rate volatility, inflation, GDP growth, and capital market capitalization. The results show that NIM in Southeast Asia is significantly influenced by the variables of relative size, credit risk, capital adequacy, diversification, industry concentration, short-term interest rate volatility, and capital market capitalization. The variables of capital adequacy, operational risk, and GDP growth have a positive influence on all observations in this study, although their significance levels vary across countries. Meanwhile, the variables that have a negative influence on NIM in all observations are diversification and capital market capitalization, only differing in their level of significance between countries.

Keywords: Net Interest Margin, bank-specific factors, industry factors, macroeconomic factors, Southeast Asia, banking

Sources: http://repository.unair.ac.id/61099/