Non-performing loans

Loans on which the borrower has stopped paying as agreed, usually 90 days or more overdue. Their share of total loans is a main gauge of a bank's asset quality.

Where you will meet it

Non-performing loans appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain the CAMELS approach to bank analysis, which covers capital adequacy, quality of assets, management, earnings, liquidity and sensitivity, with its main ratios and its limitations
  CFA Level II · Financial Statement Analysis

  “Asset quality looks at non-performing loans relative to total loans, the allowance for loan losses relative to non-performing loans, and provisions relative to net charge-offs.”

• Explain the traits of complex opportunities that emerge from market dislocation or financial strain
  CFA Level III · Private Markets Pathway

  “Typical deals include portfolios of non-performing loans, structured credit, orphaned or non-core assets, GP-led secondaries, NAV loans and structured preferred equity.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with N · Glossary