What impact does a negative net interest margin signify?

A negative net interest margin indicates that the bank's interest expenses exceed its interest income. This financial situation suggests that the bank is losing money on its core lending activities because it is paying out more in interest to depositors and other liabilities than it is earning from loans and other interest-earning assets.

In a scenario where a bank has a negative net interest margin, it faces significant challenges in meeting its interest obligations and maintaining profitability. This situation could arise due to factors such as a low-interest-rate environment or poor loan performance. Hence, recognizing that the bank is unable to generate sufficient income from its assets to cover its obligations is critical for understanding its financial health and operational efficiency.

The other options do not accurately reflect the implications of a negative net interest margin. For instance, it does not indicate effective management of customer deposits, nor does it suggest that the bank is generating high returns from lending. Additionally, stating that the bank is merely any business entity does not grasp the specific financial context of a bank's operations and performance.