Factors Affecting the Interest Margin of Private and Public Limited Commercial Banks of Bangladesh

This study examines the determinants of net interest margin (NIM) in private and public limited commercial banks in Bangladesh over the period 2009–2018. Using a balanced panel dataset of 15 banks (12 private and 3 public), the analysis investigates the effects of bank-specific factors, macroeconomic conditions, and financial structure variables on interest margin behavior. Islamic banks were excluded due to their non-interest-based operations, while foreign banks were omitted because of data limitations. Net interest margin is employed as the sole measure of bank profitability, and pooled Ordinary Least Squares (OLS) estimation is applied. The empirical results show that overhead costs, asset quality, and noninterest-bearing assets have a positive and statistically significant impact on NIM, whereas bank concentration exerts a significant negative effect. Among macroeconomic variables, inflation positively influences NIM, while GDP growth is associated with lower margins. Sub-sample analysis reveals notable differences between private and public banks in the magnitude and significance of these determinants. The findings highlight the importance of operational efficiency, asset quality management, and market structure in shaping banks’ interest margins and offer useful implications for bank managers, policymakers, and regulators in Bangladesh.