Bank net interest margins took a big hit during the coronavirus pandemic. Net interest margin, or NIM, essentially shows the difference between what banks make on interest-earning assets such as loans and what they pay out on interest-bearing liabilities such as deposits. When the Federal Reserve lowered its benchmark federal funds rate to near zero, that decreased the amount of interest banks made on their loans. There was also very little loan growth in general. Both of these factors have resulted in shrinking NIMs for roughly the last year.
But with the economy reopening and rates having been near zero for a while now, most banks are hoping that NIMs have hit a floor and are preparing to rise. However, it's not a given that it will happen this year, as many banks are still waiting on loan growth in the second half of the year.
One bank that is seeing progress in its NIM, which is a good indicator of profitability, is Citizens Financial Group (NYSE: CFG) . The large regional bank, which is based in Rhode Island and has $187 billion in assets, has been on a great run this year, with its stock up roughly 24% at Friday's prices. Now the bank sees its NIM beating prior guidance in 2021.
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This Bank Is Increasing Its Margin Guidance for the Year