This workout asks us to use the income statement and press release extracts to calculate the net interest income and the net interest margin for 2023 and 2024. We also have to comment on the change for the year.

Let's start by having a quick look at what we've been given.

First, we have a condensed income statement.

As expected, that starts with net interest income.

It then includes other income and expenses below that, resulting in net income for the year.

If we scroll further down, we can see we've got a breakdown of the net interest income.

Let's make sure that we understand what we are looking at.

We can see that that has been calculated by taking the interest income on the earning assets, and the interest expense on the interest-bearing liabilities has been subtracted, and that gives us the net interest income figure. So the first part of this workout has actually been done for us. Let's just capture those figures below.

Before we move on, let's just double-check that the numbers that we picked up from that breakdown actually do reconcile to the condensed income statement, and we can see that they do. So there's the 16,409 and the 17,527.

In order to convert this into a net interest margin, the NIM, we need to express this as a percentage of the average interest-earning assets.

That information has been given to us in the same table above.

We see we've got average balances for various line items, and the one that we're interested in is the second from the bottom, the interest-earning assets.

If we capture these figures below, we can then work out our net interest margin.

So the net interest margin is calculated by taking the net interest income and expressing that as a percentage of the average interest-earning assets, and that gives us 2.7% for 2024, and if we copy that to the right, 2.9% for 2023.

What comment can we make on this margin? First off, we can see that the margin has declined from 2023 to 2024, but why is that? Firstly, let's have a look at what's happened to the absolute level of net interest income, and we can see that that has fallen.

It's gone from 17,527 to 16,409. So that's the first part of the commentary below.

Net interest income is down. Now, this is despite the fact that there has been an increase in the total average interest-earning assets.

So what explains this decrease? If we scroll up, we can see we have information on interest rates. We've got average yields and rates paid.

We can see that the earning assets yield has gone up slightly, but the rate paid on interest-bearing liabilities, which would impact the interest expense, has gone up by more.

In addition to that, if we have a look at what's happened to the interest-bearing liabilities balance, it has increased by more than the interest generating or interest-earning assets have increased by.

And so that explains why this net interest margin has fallen.