The Determinants of Bank Net Interest Margin: Evidence from the Lebanese Banking Sector

Hamadi, Hassan and Awdeh, Ali (2012): The Determinants of Bank Net Interest Margin: Evidence from the Lebanese Banking Sector. Published in: Journal of Money, Investment and Banking No. 23 (2012): pp. 85-98.

Abstract

This study analyses the determinants of commercial bank interest margins in Lebanon using bank-specific, industry specific, monetary policy, and macroeconomic variables for the period 1996-2009. The empirical results indicate that interest rate margins are shaped differently between domestic and foreign banks. For instance, domestic bank size, liquidity, efficiency, and to a lower extent, capitalisation and credit risk, have a negative impact on interest margins. The same impact was captured by concentration, dollarization, and to a lower extent, by economic growth. On the other hand, the growth rate of deposits, lending, inflation, central bank discount rate, national saving, domestic investment, and to a lower degree, the interbank rate, all have a positive impact on net interest margins. For foreign banks, we found that size, liquidity, capitalisation, and credit risk, do not show a significant impact. Another interesting remark is that the host market macroeconomic conditions, industry characteristics, central bank discount rate, and interbank rate, have much weaker impact for foreign bank interest margins.

• Item Type: MPRA Paper
• Language: English
• Keywords: Interest Rate; Net Interest Margin; Foreign Banks; Concentration.
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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