A massive hit on BNK Banking Corp’s net interest margin was offset by disciplined balance sheet growth over the last year. The Perth-based bank continues to trade in the red, exacerbated by a slump in the NIM to 1.01 per cent in the December 2023 half from 1.32 per cent a year earlier. BNK cited “strong competition across both loans and deposits” and the “challenging interest rate environment” for the heaviest hit to margins reported so far this profit season. BNK pointed to “unfavourable deposit mix outcomes” flowing from its wish to secure funding stability via term deposits, leading to margin compression. The bank is counting on fixed rate mortgage roll off to offset margin pressure over the next year. It will need to pull this and many other levers to even come close to a target NIM of 2 per cent one day. Asset quality is being tested, with loans more than 30 days or more in arrears up to 1.12 per cent at December, from 0.48 per cent in June.  The bank said 0.41 per cent of loans were 90 days or more in arrears. The bank is targeting 20 per cent of new business flows this year in “higher margin assets” such as SME loans and margin loans. Statutory net profit, or loss, improved to a loss of A$1.82 million over the December half from a loss of $2.68 million in the corresponding half. Directly funded loans increased 9 per cent to $1.48 billion.  The total managed loan book, however, remained stable at $2.7 billion.  Looking like it might well expire and exit the industry at several points in recent years, BNK Banking Corp is still trudging along in the face of the margin hit. BNK has a congested share register and slender interest in its shares, which at the Friday close of 36 cents represents a 64 per cent discount to NTA.