Keywords
Banks’ interest margins; Commercial banks; Panel corrected standard errors (PCSE)
Abstract
This paper analyzes the determinants of banks’ net interest margins in Honduras during the years 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.
Acknowledgments
The authors would like to thank Lisandro Abrego, Pablo Druck, Bogdan Lissovolik, Carlos Medeiros, and staff of the Comisión Nacional de Bancos y Seguros for helpful comments. The authors remain responsible for all remaining errors and omissions
Recommended Citation
Nassar, K., Martinez, E., & Pineda, A. (2024). Determinants of Banks’ Net Interest Margins in Honduras. Journal of Banking and Financial Economics, 2017(7), 5-27. https://doi.org/10.7172/2353-6845.jbfe.2017.1.1
First Page
5
Last Page
27
Page Count
23
Received Date
16 February 2016
Revised Date
01 August 2016
Accept Date
05 August 2016
Online Available Date
27 January 2017
DOI
10.7172/2353-6845.jbfe.2017.1.1
JEL Code
E43; E44; D43
Publisher
University of Warsaw