Banking
Loan-to-deposit ratio (LDR)
Loans divided by deposits: how much of its deposit base a bank has lent out.
Facts checked against sources onWhat does Loan-to-deposit ratio (LDR) mean?
The loan-to-deposit ratio is total loans divided by total deposits. Example: 850 of loans and 1,000 of deposits give an LDR of 85 percent. A low ratio can mean the bank is not putting its deposits to work and may earn less. A ratio above 100 percent means it funds some loans with wholesale borrowing, which is usually more expensive and less stable than deposits. What counts as healthy depends on the country and the bank's model.
Where does it come up in case interview prep?
- How a bank works and makes moneyLesson in Retail and commercial banking
Related terms
- CASA ratioThe share of deposits held in low-cost current and savings accounts.
- Liquidity coverage ratio (LCR)Whether a bank holds enough easy-to-sell assets to survive 30 days of stress.
- Net interest margin (NIM)What a bank earns on its loans and investments after paying for its funding, as a share of those assets.
- Cost-to-income ratioOperating costs as a share of operating income. Lower means a more efficient bank.
- Cost of riskLoan loss charges as a share of loans, usually quoted in basis points.
- Non-performing loan (NPL) ratioThe share of a bank's loans that borrowers have stopped paying.
- CET1 capital ratio (and risk-weighted assets)A bank's highest-quality capital as a share of its risk-weighted assets.
- Return on equity (ROE)Net income as a share of shareholders' equity.
Learn it in context
See Loan-to-deposit ratio (LDR) at work in a lesson from Retail and commercial banking, with checks as you go.
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