## 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.

## BREAKING DOWN '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%.