Profitability
Pre-Provision Net Revenue
Also known as PPNR
Pre-Provision Net Revenue (PPNR) is the bank's earnings before credit losses — net interest income plus noninterest income minus noninterest expense. It is the core measure of a bank's earnings power independent of credit-cycle noise.
Formula
PPNR strips out the two most volatile income-statement lines — the provision for credit losses (which depends on macro forecasts and CECL modeling) and income tax (which depends on jurisdiction and timing). What remains is the bank's underlying operating earnings power.
Why it matters
PPNR is the Federal Reserve's preferred earnings metric in the annual CCAR stress test because it isolates the franchise's earnings capacity from credit and tax decisions. Analysts use PPNR-to-assets as a normalized profitability comparison across banks of different risk profiles and tax positions.
How to interpret
PPNR / average assets above 1.5% is strong for a US bank; 1.0-1.5% is typical; below 1.0% raises concern about franchise viability. The trend matters as much as the level — a falling PPNR ratio signals margin compression, fee weakness, or efficiency deterioration.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| ≥ 1.5% | Strong | High underlying earnings power. |
| 1.0–1.5% | Typical | Median US bank range. |
| 0.5–1.0% | Weak | Marginal franchise economics. |
| < 0.5% | Concern | Insufficient earnings to absorb normal credit losses. |
Worked example
Frequently asked
Why does PPNR exclude the provision for credit losses?
Because the provision is a forward-looking estimate that depends on macro forecasts under CECL, not on current-quarter operating activity. Excluding it isolates the operating run-rate from credit-cycle volatility.
Is PPNR a GAAP measure?
No. PPNR is a regulatory/analytical measure assembled from GAAP income-statement lines. It is not a line item on either GAAP financials or call reports — it must be computed.
Why is PPNR the centerpiece of CCAR?
Because in stress scenarios, the provision spikes and equity-tax effects move; PPNR isolates the franchise's earnings capacity that must absorb the stress losses. A bank with strong PPNR can absorb a deep recession; one with weak PPNR cannot.
Sources
- FFIEC Call Report Schedule RI (Income Statement)
- Federal Reserve CCAR / DFAST disclosures
See PPNR across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by PPNR, refreshed quarterly within 48 hours of FFIEC release.