The interest margin expresses the difference between the interest generated from investments and interest expenses. This is a good indicator of how well their investment decisions are comparing to the cost of their funds. NAB had an interest margin of 1.87% in 2006 and 1.76% in 2007. This decrease is minimal and when considered in conjunction with the 12.2% increase in NAB’s Net interest income from 2006 to 2007 it suggest a significant increase in earning assets. This has been driven “continued strong growth in
lending along with growth in customer deposits”. NAB would desire their interest margin to increase as it reflects the performance of the company’s investments however they would be pleased with the sizeable increase in their net interest income. Declining interest margins were not unique to Australia in the UK “Interest margins in the major banks in the UK declined from 2.49% in December 2006 to 2.38% in June 2007”.
(NAB 2007 Annual Financial Report pg2)
(http://www.kpmg.com.au/Portals/0/MajorsYearEnd2007-Commentary.pdf
page 5)
Net margin is the ratio of net profits to revenues that shows how much of the companies revenue eventuates into a profit. An increasing net margin is desirable as it increases the profitability of the company which pushes up the value of a company’s share price. NAB had a net margin of 15.86% in 2006 and 15.43%% in 2007. A fall in net margin is unfortunate for NAB. Factors that contributed to the fall “Total liabilities at September 30, 2007 increased by 17.1% to $534,749 million from $456,813 million at September 30, 2006”. NAB’s increase in debt offset their profits and decreased their margins. The bank also experienced an increase in their tax expense ...