How do you calculate the spread ratio of a bank?

The spread ratio of a bank is calculated by taking the difference between the interest income generated from loans and the interest expense paid on deposits, then dividing that figure by the bank's total assets. The formula can be expressed as: Spread Ratio = (Interest Income - Interest Expense) / Total Assets. This ratio helps assess the bank's profitability and efficiency in managing its interest-earning and interest-paying activities. A higher spread ratio typically indicates better financial health and profitability.