Net revenue after provisions

What is Net Revenue After Provisions?

Net Revenue After Provisions represents a bank’s total operating income after accounting for expected credit losses on loans and other financial assets.

It is calculated as:

Net Revenue After Provisions = Net Revenue − Provision for Credit Losses

Where:

• Net Revenue = Net Interest Income + Non-Interest Income
• Provision for Credit Losses = expense reflecting expected loan defaults and credit deterioration

Components

Net Revenue

Includes the bank’s total income from core activities:

• Net Interest Income (NII)
• Non-Interest Income (fees, trading, commissions, etc.)

Provision for Credit Losses

Also referred to as:

• Loan Loss Provisions (LLP)
• Cost of Risk
• Expected Credit Losses (ECL, under IFRS 9)

Represents:

• Expected losses on loans and credit exposures
• Changes in credit quality of the loan portfolio
• Forward-looking estimates (especially under IFRS)

Why is This Metric Important?

Net Revenue After Provisions is a critical measure because it reflects:

1. Core Profitability After Credit Risk

• Shows how much income remains after accounting for credit losses
• Bridges revenue and bottom-line profitability

2. Asset Quality Impact

• High provisions → deterioration in loan quality
• Low provisions → stable or improving credit conditions

3. Cycle Sensitivity

• During economic downturns → provisions increase → metric declines
• During stable periods → provisions normalize → metric improves