Determinants of Banks' Net Interest Margins in Honduras

By Koffie Ben Nassar, Edder Martinez, Anabel Pineda

September 9, 2014

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Koffie Ben Nassar, Edder Martinez, and Anabel Pineda. Determinants of Banks' Net Interest Margins in Honduras, (USA: International Monetary Fund, 2014) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the determinants of banks’ net interest margins in Honduras during 1998 to 2013—a period characterized by increasing banks’ net interest margins, foreign bank participation and consolidation. In line with findings in the previous literature, we find that operating costs are the most important drivers of banks’ net interest margins. We also find that competition among banks has led to higher concentration and that funding by parent banks positively impacts foreign banks’ net interest margins. Together, these results suggest that banks, particularly foreign banks, are under pressure to consolidate and reduce operating costs in order to offer competitive interest margins. We conclude that further structural reforms and consolidation may lower banks’ net interest margins.

Subject: Banking, Commercial banks, Credit risk, Financial institutions, Financial regulation and supervision, Foreign banks, Liquidity risk, Loans

Keywords: Bank, Bank default, Bank ownership, Banks’ interest margins, Commercial banks, Credit risk, Europe, Foreign banks, Funding model, Global, Interest margin, Liquidity risk, Loans, Panel corrected standard errors (PCSE), Parent bank, Real GDP, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/163
Stock No:

WPIEA2014163
ISBN:

9781498317931
ISSN:

1018-5941

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