Internal Capital Generation Rate - ICGR

AAA

DEFINITION of 'Internal Capital Generation Rate - ICGR'

A quantifiable mathematical rate that portrays how quickly a bank is able to generate equity capital. The Internal Capital Generation Rate (ICGR) is calculated by dividing the bank's retained earnings by the average balance of the combined equity of all stockholders for a given accounting period. The bank's retained earnings are found by subtracting dividends paid from net income.

INVESTOPEDIA EXPLAINS 'Internal Capital Generation Rate - ICGR'

The higher the ICGR, the more able a bank is to produce capital to loan. This rate improves with a bank's profitability and is also affected by the price of its stock. A quick way to calculate the ICGR is to take the plowback ratio and multiply by the ROE. For example, if the plowback ratio is 0.80 and ROE is 17%, the ICGR is 13.6%. Thus, the company grew their capital equity by 13.6%.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders ...
  3. Capital

    1) Financial assets or the financial value of assets, such as ...
  4. Internal Rate Of Return - IRR

    The discount rate often used in capital budgeting that makes ...
  5. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  6. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
RELATED FAQS
  1. How do central banks inject money into the economy?

    Central banks use several different methods to increase (or decrease) the amount of money in the banking system. These actions ... Read Full Answer >>
  2. What are some of the limitations and drawbacks of using a payback period for analysis?

    Limitations, or disadvantages, of using the payback period method in capital budgeting include the fact that it fails to ... Read Full Answer >>
  3. What are common concepts and techniques of managerial accounting?

    The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and ... Read Full Answer >>
  4. How are fixed costs treated in cost accounting?

    Fixed costs are one of the two major inputs, along with variable costs, in cost accounting that are used by a company's management ... Read Full Answer >>
  5. When is market to market accounting performed?

    Mark to market accounting is used for substantially all investments or financial instruments held on a corporation's balance ... Read Full Answer >>
  6. When would a vendor care about its accounts payable turnover ratio?

    Vendors can act as suppliers or manufacturers, so they must pay attention to accounts payable and accounts receivable. An ... Read Full Answer >>
Related Articles
  1. Economics

    The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.
  2. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  3. Forex Education

    Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.
  4. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  5. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  6. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.
  7. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.
  8. Economics

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  9. Fundamental Analysis

    What is Year-to-Date?

    Year-to-date (YTD) is a term that describes financial results from the beginning of the current year up to the day the financial number is reported.
  10. Investing Basics

    Explaining Net Tangible Assets

    Net tangible assets is a company’s total assets subtracting both intangible assets (such as goodwill and intellectual property) and total liabilities.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!