Banking · Bank Profitability Metrics
A bank's Net Interest Margin (NIM) is defined as Net Interest Income divided by Total Assets. This ratio is a primary measure of core profitability. Which strategy, if executed successfully, would lead to the highest increase in the bank's NIM, all other factors remaining constant?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Increasing the proportion of low-yield, highly liquid government securities in the asset mix.
- 2Reducing the bank's Non-Interest Income from fees and commissions.
- 3Shifting the composition of the loan book towards high-yield segments like retail and unsecured loans.✓
- 4Increasing the overall size of the bank's Total Assets (loan book).
Correct answer
Shifting the composition of the loan book towards high-yield segments like retail and unsecured loans.
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