Loss to loan portfolio

A measure that examines the impact of loan losses on a financial institution's lending portfolio, like the ebb and flow of the tide affecting a shoreline, comparing the value of defaulted loans to the total value of the loans issued during a specific period.

Example

Suppose a bank has a total loan portfolio of $10 million for a given period but experiences a loss of $200,000 due to loan defaults or delinquencies. The loss to loan portfolio ratio would be calculated as $200,000 / $10,000,000 = 0.02 or 2%. This percentage provides insight into the credit risk and lending practices of the financial institution and can be used to identify areas for improvement or evaluate the effectiveness of risk management strategies.

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