Loss to loan portfolio

A measure that shows how loan losses affect a financial institution's lending portfolio. It compares the value of defaulted loans with the total value of loans issued during a specific period.

Example

Suppose a bank has a total loan portfolio of $10 million for a given period and records a loss of $200,000 from loan defaults or delinquencies. The loss to loan portfolio ratio is $200,000 / $10,000,000 = 0.02, or 2%. This percentage helps assess credit risk and lending practices. Teams can use it to spot areas to improve or to evaluate whether risk management strategies are working.

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