Net Interest Margin

The net interest margin measures the profitability of investments which were made using borrowed funds.  A negative net interest margin would suggest that borrowing to invest has caused overall profit to decline.

Net Interest Margin = Return on Invesment - Cost of Funds

For example  imagine a simple bank which only has two products.  Savings accounts, and loans.  The bank pays 1% interest on savings, but charges 5% interest on loans.   This means that the bank has a net interest margin of 4%