Profitability is the difference between a bank’s income and expenses.
A Bank’s income, minus expenses, equals profitability. And the amount of profit a bank earns is judged relative to its total assets.
Any realised profits belong to bank shareholders but a bank’s profitability also provides a buffer against losses before capital is affected.
One common way to measure profitability is against the value to total assets, which is called the return on assets and this measures how efficiently a bank uses its assets to generate profits.
There are other ways to measure a bank’s profitability and you can learn more about these on the Bank Financial Strength Dashboard.