Loan loss provisions cost actual real profit though because they cause the bank to hold more risk capital reserves, which basically means some of their capital

Loan loss provisions cost actual real profit though because they cause the bank to hold more risk capital reserves, which basically means some of their capital is dry powder and isn't generating returns. The difference between their expected rate of return on risk capital and the risk free rate (which you could see as "opportunity cost of capital" basically) is lost for this amount.