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The effective interest rate should be calculated and then converted to the monthly rate:

$$ \left( 1 + \frac{i_a}{n_a} \right)^{n_a} = \left( 1 + \frac{i_b}{n_b} \right)^{n_b} = \left( 1 + \frac{i_{\text{annual}} }{1} \right)^{1} $$

https://www.investopedia.com/terms/e/effectiveinterest.asp

This is a bit of a rabbit hole. The right way is whatever is agreed, and there are many ways to agree it.

https://en.m.wikipedia.org/wiki/Day_count_convention

My mortgage company charges interest based on the number of days in the month divided by 365. I have replicated their calculation like this. I'm not sure what they do in leap years - there are at least 3 distinct approaches.

My mortgage company seems to use the same formula.

I assume to take compounding into account, you want the 12th root. Instead of 12% → 1%, 1.12^(1/12) gives around 0.95%.

It could be correct, it just depends. Also according to the comments banks do all kinds of weird things.