Low charge-off rate
All banks maintain loan loss reserves to cover estimated potential losses in their loan portfolios. Charge-offs are the value of loans removed from the books and deducted from these loss reserves. Provisions are the additions made to loss reserves each period.
Charge-off rate is charge-off expressed as a percentage of average loans for the period. KeyCorp’s (KEY) charge-off rate at 0.22% is lower than the average for the 100 largest banks in the United States. It is also lower than for peers such as Regions Financial (RF), Wells Fargo (WFC), SunTrust (STI), and BB&T (BBT). Together, these four banks form ~6.4% of the SPDR S&P Bank ETF (KBE).
A loan is said to be nonperforming when scheduled payments are not received for at least 90 days. As such, higher nonperforming loans (or NPLs) indicate poor asset quality. KeyCorp’s nonperforming loans to end-of-period loans ratio is 0.73. The ratio is 0.48 for peer SunTrust Bank (STI).
Delinquency rate is lower than the industry
Delinquent loans are those past due 30 days or more and still accruing interest. They include nonaccrual loans as well. Nonperforming loans are classified as nonaccrual if principal and interest have not been paid for at least 90 days, except for loans backed by adequate collateral. Delinquent loans are measured as a percentage of end-of-period loans.
The delinquency rate for the 100 largest banks in the fourth quarter of 2014 was 2.72. The rate is highest for residential real estate loans and lowest for commercial, industrial, and agricultural loans. The 30–89 days delinquency rate for KeyCorp is 0.41%. The 90+ days rate is 0.17%.
One of the factors that contributes to the lower delinquency rate for KeyCorp is its bigger commercial loan portfolio. KeyCorp forms ~3.1% of the iShares U.S. Regional Banks ETF (IAT).