Determinants of banks net interest income: The example of Serbia

Net interest income represents one of the main indicators of banks' profitability. In practice, return on assets (ROA) and return on capital (ROE) indicators are most often used as indicators, but the topic of this study is the investigation of determinants, that have the greatest impact on the net interest income of banks in the Serbian market. The research is based on numerous previous analyzes of factors that have effects on the profitability of banks in many countries. This study covers the period from 2014 to 2021 and includes a total of 22 banks currently operating in the Serbian market. The data used for the purposes of the research were taken from the financial reports of the banks themselves, as well as the World Bank database. In the research, the authors take Net Interest Margin (NIM) as a dependent variable, while as independent variables they take indicators of Net Non-Interest Margin (NNIM), Liquidity (LIQ), Debts (LOAN), Bank Size (SIZE), Non-performing loans (NPL) and Unemployment (UNEM). In the analysis, the authors analyzed the correlation matrix, the Levin, Lin & Chu unit root test, the variance inflation index, as well as the derivation of regression models based on fixed and random effects. The findings showed a negative effect of liquidity and bank size factors on direction of net interest margin, while debt and unemployment indicators showed a positive influence.