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I am doing financial health analysis for banks. The health checks involved are:

  1. Bad Loan provisions > actual Bad Debts written off ?

I check across financial statements, there are 3 related fields:

  1. Income statement - Provision for credit losses
  2. Balance Sheet - Allowance for loan & lease losses
  3. Cash Flow - Provision for loan losses

Screenshots from app

From above, which are Bad loan provision & actual Bad Debts written off ? Do I have to also consider any figure from previous year's reports?

  1. Level of bad loans (Net Charge Off Ratio < 3%)

    Bad Loans written off / Total loans < 3%

Similarly, how to get Bad Loans written off from financial statements?

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Probably need to look more deeply into the 10-K.

The allowance for loan and lease losses (ALLL) from the B/S is sort of a pre-determined number based on the bank's current loan portfolio and recent default experience. The provision for credit losses is basically the amount of cash the bank committed to replenish the ALLL to the aforementioned level after net charge-offs. (BTW it's the same number on both the I/S and C/F.) Neither number tells you exactly what happened this year.

What you are looking for is probably the Analysis of ACL (allowance for credit loss) in the 10-K, which shows the charge-offs and the recoveries, broken down by loan categories. There are also some other tables that you might find useful.

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  • Thanks @xiaomy for you reply. Sorry guys for the off-topic. – Shuwn Yuan Tee Dec 31 '17 at 4:45

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