Abstract

This study investigates the determinants of net interest margin of commercial banks in Pakistan that covers the period of 10 years 2006 to 2015. By using secondary data apply random effect regression to a panel of 22 commercial banks of Pakistan. The study consists of dependent variable NIM, Independent variables, control variables and macroeconomic variables. The estimation results show that operating expenses and bank deposits have positive and significant effect on net interest margin of the commercial banks in Pakistan. The study also finds that the leverage, credit risk, liquidity risk, opportunity cost, having negative and significant relationship with the net interest margin. From macroeconomic variables GDP and inflation have negative and insignificant relation with the net interest margin.