Bank net interest margin related to risk, ownership and size: an exploratory study of the Serbian banking industry

Figures & data

Table 1. Summary descriptive statistics for total sample by variable (2002–2010).

	Mean
Financial ratio (%)	St. dev	Max	Min	All	Foreign	Private	State	Large	Medium	Small
Dependent variable
Net interest margin	4.499	26.008	1.628	9.416	7.723	10.075	11.849	7.817	7.978	12.664
Independent variables
Loan loss reserves/gross loans	16.626	97.951	0.675	13.038	6.424	11.322	27.362	9.887	11.680	17.876
Equity to total assets	14.531	91.440	5.032	25.239	19.717	30.323	29.875	20.023	22.403	33.867
Liquid assets/deposits and short-term funding	25.800	164.608	15.855	56.661	52.352	52.115	69.857	53.462	50.549	66.585
Earnings to total assets	12.030	96.176	34.246	68.479	69.271	70.673	64.527	71.732	69.884	63.485
Cost to income ratio	59.618	419.844	10.543	85.485	103.927	65.072	73.868	69.436	96.147	91.502
(Short term assets – short term funding)/equity	74.914	297.237	3.425	78.394	87.031	37.042	93.834	71.678	92.299	76.873
Earning assets –(deposits and short-term funding)/equity	85.529	553.898	0.317	73.771	94.841	48.196	63.035	97.801	76.347	51.598

Source: Authors calculation.

Table 2. Estimation multiple linear regression results for total sample.

Variable	Regression 1	Regression 2	Regression 3	Regression 4
Intercept	−0.284	−0.256	−0.029	0.024
	(−0.546)	(−2.958)^***	(−0.351)	(0.423)
Default risk	0.039	−0.051	−0.064	−0.053
	(0.355)	(−2.946)^***	(−4.129)^***	(−3.497)^***
Capitalisation	0.159	0.213	0.217	0.222
	(1.753)^*	(9.687)^***	(11.115)^***	(12.661)^***
Liquidity	0.019	0.021	0.007	–
	(0.600)	(1.766)^*	(0.674)	–
Management quality 1	−0.113	–	−0.141	−0.137
	(−2.221)^**	–	(−6.486)^***	(−6.964)^***
Management quality 2	–	−0.004	–	–
	–	(−0.764)	–	–
Interest rate risk 1	−0.006	–	–	–
	(−0.677)	–	–	–
Interest rate risk 2	–	0.003	−0.001	–
	–	(0.863)	(0.244)	–
Concentration	0.045	0.041	0.029	0.019
	(0.824)	(3.011)^***	(2.402)^**	(2.057)^**
Bank intermediation	15.664	4.474	−2.237	–
	(0.663)	(1.884)^*	(−0.982)	–
Inflation	0.011	−0.022	−0.001	–
	(0.044)	(−0.212)	(−0.010)	–
Growth	0.625	0.394	0.192	–
	(1.089)	(2.752)^***	(1.474)	–
R^2	0.502	0.498	0.607	0.572
Adjusted R^2	0.277	0.468	0.583	0.561
F	2.239	16.556	25.708	51.841
N	30	160	160	160

Figures in parenthesis are t-statistics.

^* Significant at 10% level.

^** Significant at 5% level.

^*** Significant at 1% level.

Source: Authors calculation.

Table 3. Estimation results by bank ownership.

Variable	Foreign	Domestic private	Domestic public
Intercept	−0.101	−0.016	−0.174
	(−0.891)	(−0.133)	(−0.817)
Default risk	−0.099	−0.135	−0.065
	(−1.688)^*	(−3.177)^***	(−2.675)^**
Capitalisation	0.207	0.195	0.208
	(7.029)^***	(7.081)^***	(3.888)^***
Liquidity	0.008	0.039	−0.022
	(0.552)	(2.487)^**	(−1.011)
Management quality 1	−0.050	−0.118	−0.240
	(−1.538)	(−3.241)^***	(−4.661)^***
Interest rate risk 2	0.004	−0.008	−0.010
	(1.239)	(−1.233)	(−1.058)
Concentration	0.024	0.017	0.072
	(1.705)^*	(1.022)	(2.209)^**
Bank intermediation	1.925	3.020	−2.751
	(0.462)	(1.092)	(−0.569)
Inflation	0.006	0.087	−0.233
	(0.050)	(0.719)	(−0.993)
Growth	1.197	0.062	0.543
	(1.183)	(0.328)	(1.736)^*
R^2	0.519	0.753	0.752
Adjusted R^2	0.453	0.689	0.678
F	7.817	11.847	10.142
N	75	45	40

Figures in parenthesis are t-statistics.

^* Significant at 10% level.

^** Significant at 5% level.

^*** Significant at 1% level.

Source: Authors calculation.

Table 4. Estimation results by bank size.

	Large	Medium size	Small
Intercept	0.144	−0.056	−0.087
	(1.338)	(−0.327)	(−0.717)
Default risk	−0.052	0.006	−0.076
	(−2.454)^**	(0.112)	(−3.928)^***
Capitalisation	0.171	0.126	0.251
	(7.885)^***	(2.245)^**	(7.726)^***
Liquidity	−0.015	0.024	0.001
	(−0.986)	(1.036)	(0.036)
Management quality 1	−0.132	−0.116	−0.160
	(−3.435)^***	(−2.426)^**	(−5.091)^***
Interest rate risk 2	−0.003	0.021	−0.012
	(−1.065)	(2.802)^***	(−2.246)^**
Concentration	0.004	0.024	0.036
	(0.306)	(0.982)	(2.007)^*
Bank intermediation	−3.700	0.040	2.208
	(−1.152)	(0.008)	(0.665)
Inflation	0.058	0.059	0.033
	(0.549)	(0.321)	(0.229)
Growth	0.040	0.105	0.288
	(0.268)	(0.405)	(1.399)
R^2	0.631	0.358	0.792
Adjusted R^2	0.557	0.226	0.746
F	8.541	2.723	17.301
N	55	54	51

Figure in parenthesis are t-statistics.

^* Significant at 10% level.

^** Significant at 5% level.

^*** Significant at 1% level.

Source: Authors calculation.

Table A1. Variable definition and sources.

Variable	Definition	Data source
NIM	Interest income minus interest expenses divided by average earning assets	BankScope
Default risk	Ratio of loan loss reserves to gross loans	BankScope
Capitalization	Ratio of book equity to total assets	BankScope
Liquidity	Ratio of liquid assets to sum of deposits and short-term funding	BankScope
Management quality 1	Ratio of earning assets to total assets	BankScope
Management quality 2	Cost to income ratio	BankScope
Interest rate risk 1	Difference between short term assets and short term funding divided by equity	BankScope
Interest rate risk 2	Earning assets minus sum of deposits and short-term funding, divided by equity	BankScope
Concentration	Herfindhal-Hirschman index of concentration (assets)	National bank of Serbia
Inflation	Annual consumer price index	Statistical Bureau
Bank intermediation	Ratio of bank assets to gross domestic product	National bank of Serbia and Statistical Bureau
Growth	Real GDP rate of change	Statistical Bureau

Source: Authors calculation.

Table A2. List of banks entering the sample and ownership status.

	Initial status		Change of status
	In the form	Covered from	Into	Starting at
BancaIntesa	DPR	2002	FO	2006
Komericijalna banka	DPU	2008	–	–
Raiffeisen bank	FO	2002	–	–
EFG bank	FO	2005	–	–
Hypo Alpe Adria	FO	2003	–	–
AIK banka	DPR	2002	–	–
Societe Generale bank	FO	2003	–	–
Unicredit	FO	2004	–	–
Vojvođanska banka	DPU	2003	FO	2007
Alpha banka	FO	2008	–	–
Procredit	FO	2002	–	–
Volksbanka	FO	2005	–	–
Erste banka	DPU	2002	FO	2006
OTP	FO	2006	–	–
Pireaus banka	DPR	2002	FO	2006
NLB banka	DPR	2004	FO	2008
Agrobanka	DPR	2003	–	–
Credi Agricole	DPR	2005	FO	2006
Univerzal banka	DPR	2005	–	–
Razvojna banka Vojvodine	DPU	2003	–	–
Poštanska štedionica banka	DPU	2004	–	–
Marfin banka	DPR	2004	FO	2007
Čačanska banka	DPU	2003	DPR	2006
KBC banka	DPR	2005	FO	2008
Findomestic	DPR	2004	–	–
Srpska banka	DPU	2002	–	–
Opportunity banka	FO	2006	–	–
Privredna banka Beograd	DPU	2004	–	–
Jubmes	DPU	2002	–	–

Legend: FO – foreign owned; DPR – domestic privately owned; DPU – domestic publicly owned.

Note: Banks are listed according to their size at the end of 2009.

Source: Authors calculation.