Determinants of Banks' Net Interest Margins in Honduras

Author/Editor:

Koffie Ben Nassar ; Edder Martinez ; Anabel Pineda

Publication Date:

September 9, 2014

Electronic Access:

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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.

Series:

Working Paper No. 14/163

Subject:

English

Publication Date:

September 9, 2014

ISBN/ISSN:

9781498317931/1018-5941

Stock No:

WPIEA2014163

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

26

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