Profitability
Pre-Provision Net Revenue
Also known as PPNR, Pre-Tax, Pre-Provision Income, Pre-Provision Profit
PPNR stands for pre-provision net revenue: a bank's net interest income plus noninterest income minus noninterest expense. It is what the bank earns before it sets aside provisions for credit losses and pays income tax, so it measures the earnings available to absorb loan losses.
How to calculate PPNR (PPNR formula)
PPNR leaves out the two most volatile lines of the income statement: the provision for credit losses, which depends on economic forecasts and CECL modeling, and income tax, which depends on tax status and timing. What remains is the run rate of the banking franchise. On the Call Report the three inputs are Schedule RI items 3, 5.m and 7.e. Realized gains and losses on securities (items 6.a and 6.b) sit outside noninterest income, so a PPNR built from these items already excludes them. Income before taxes is PPNR minus the provision plus those securities gains or losses.
- Take net interest income for the period from Call Report Schedule RI, item 3 (RIAD4074). Call Report income is year to date, so subtract the prior quarter's figure to get one quarter alone.
- Add total noninterest income, Schedule RI, item 5.m (RIAD4079), which covers service charges, fiduciary, card, mortgage banking and other fee revenue.
- Subtract total noninterest expense, Schedule RI, item 7.e (RIAD4093), which covers salaries, premises and other operating costs.
- The result is PPNR in dollars. To compare banks of different sizes, annualize a quarter's PPNR (multiply by 4) and divide by average total assets from Schedule RC-K, item 9, for PPNR as a percent of assets.
Worked example
Source: FFIEC Call Report, Schedule RI, quarter ended June 30, 2026, the quarter alone: net interest income (RIAD4074), total noninterest income (RIAD4079) and total noninterest expense (RIAD4093); quarterly average total assets from Schedule RC-K, item 9 (MDRM 3368), as published in the UBPR.
Why does PPNR matter?
PPNR is the first line of defense against credit losses: a bank pays for its loan losses out of PPNR before it touches capital. That is why the Federal Reserve's supervisory stress tests (DFAST and CCAR) project PPNR for every bank under each scenario and set it against projected losses. Analysts use PPNR to assets as a profitability comparison that is not distorted by one bank building reserves while another releases them, or by differences in tax status.
How do you interpret PPNR?
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. Compare PPNR with the provision: a bank whose quarterly provision is a small fraction of its PPNR has a wide cushion, while one whose provision approaches its PPNR is close to a loss.
How do bank examiners use PPNR?
PPNR is a building block of the Federal Reserve's supervisory stress test. For each firm in the test, the Federal Reserve projects PPNR over a nine-quarter scenario and sets it against projected loan losses to estimate how far capital would fall, which sets the firm's stress capital buffer. Firms in the test also project PPNR in their own capital plans. At smaller banks, examiners read the same quantity under earnings, the E in the CAMELS rating: the earnings available to absorb credit losses before capital is touched.
What is a good PPNR?
| 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. |
PPNR vs pretax income vs net income
The three measures start from the same revenue and stop at a different line of the income statement. PPNR stops before credit costs, pretax income after them, and net income after tax.
| Measure | Formula | What it shows |
|---|---|---|
| Pre-provision net revenue (PPNR) | Net interest income + noninterest income − noninterest expense | Earnings power before credit losses and taxes. |
| Pretax income | PPNR − provision for credit losses ± securities gains and losses | Earnings after the cost of credit, before tax. |
| Net income | Pretax income − income taxes | The bottom line that builds capital through retained earnings. |
| Efficiency ratio | Noninterest expense / (net interest income + noninterest income) | Cents of operating cost per dollar of the revenue PPNR starts from. |
PPNR and the efficiency ratio describe the same revenue from two sides: PPNR divided by revenue equals 1 minus the efficiency ratio, so a bank with a 60% efficiency ratio keeps 40 cents of each revenue dollar as PPNR.
Frequently asked
What does PPNR stand for?
PPNR stands for pre-provision net revenue. "Pre-provision" means before the provision for credit losses, the expense a bank books to build its loan loss reserve. Some banks and analysts call the same figure pre-tax, pre-provision income.
What is the PPNR formula?
PPNR = net interest income + noninterest income − noninterest expense. On the Call Report these are Schedule RI items 3, 5.m and 7.e. Divide an annualized PPNR by average total assets to compare banks of different sizes.
What does PPNR mean in banking?
It means the profit a bank makes from lending, deposits and fees after paying its operating costs, before credit losses and taxes. A bank with high PPNR can absorb more loan losses out of current earnings without eating into capital.
What is PPNR modeling?
PPNR modeling is the stress-testing practice of projecting a bank's net interest income, noninterest income and noninterest expense over several quarters under baseline and adverse economic scenarios. The projected PPNR is set against projected credit losses to see how far capital would fall. Large banks build these models for the Federal Reserve's DFAST and CCAR exercises, and smaller banks use the same approach in their own capital planning.
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.
What is the difference between PPNR and net income?
Net income is PPNR minus the provision for credit losses, plus or minus securities gains and losses, minus income tax. Two banks with the same PPNR can report very different net income in a quarter when one is building reserves and the other is releasing them.
Sources
- FFIEC Call Report Schedule RI (Income Statement)
- Federal Reserve CCAR / DFAST disclosures
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