Professional Documents
Culture Documents
Session 25 - IRR - GAP Analysis - II PDF
Session 25 - IRR - GAP Analysis - II PDF
Pradeepta Sethi
TAPMI
Interest
Assets Yield rates Liabilities costs
Rate-
sensitive 500 6% 600 2%
Fixed rate 350 9% 220 4%
Non-
earning 150 0 100 0
Equity 80
Factors Total 1000 1000
• ∆𝐍𝐈𝐈𝐞𝐱𝐩 = 𝐆𝐀𝐏×∆𝐢𝐞𝐱𝐩
Factors Equity
Total 2000
160
2000
affecting NII
• NII varies directly with changes in the volume of
earning assets and interest-bearing liabilities,
Changes in regardless of the level of interest rates
• NII = 0.06(1000)+0.09(700)-0.02(1200)-
volume 0.04(440) = 81.40
• NIM = 81.40/1700=4.79%
• GAP = 1000-1200= -200
• NII doubles because the bank earns the same
interest spread on twice the volume of earning
assets such that NIM is unchanged.
Interest
Assets Yield rates Liabilities costs
Rate-
sensitive 540 6% 560 2%
Fixed rate 310 9% 260 4%
Nonearnin
g 150 0 100 0
Factors Equity
Total 1000
80
1000
affecting NII
Objective Approach