Non-performing refers to an asset, particularly in finance, that is not generating income or returns as expected. It typically describes loans or investments that have failed to yield any returns or those that are in default, meaning they are not meeting contractual payment obligations. This term can indicate financial distress and potential losses for lenders or investors.
Non-performing meaning with examples
- The bank had to write off several non-performing loans as they could no longer collect payments from the borrowers who had defaulted. This action, while necessary, significantly impacted the bank’s overall financial health and performance for the fiscal year.
- In the real estate market, non-performing properties often become a burden for owners. When these properties fail to generate rental income, they can decrease the owner's equity and require significant investments for repairs and renovations to become viable again.
- The company was forced to restructure its portfolio due to an increase in non-performing assets. These assets had been underperforming for years, leading the management to reassess their investment strategies in order to revitalize growth.
- Investors should always be wary of non-performing investments, as they can signify a range of underlying problems, including poor management, market downturns, or changes in consumer behavior affecting income generation.
- Regulatory bodies often scrutinize financial institutions to ensure they effectively manage non-performing loans. High levels of such loans can indicate systemic risks within the banking sector that could threaten the overall economy.