Net Charge-Off
NCO. Actual loan losses written off the books during the period, net of any recoveries on previously charged-off loans. While loan-loss provisions are managements estimate of future losses, NCO is the reality check -- the realized losses now hitting the income statement. Comparing the trajectory of provisions to the trajectory of NCO tells you whether management is building reserves (provisions exceed NCO) or releasing reserves (NCO exceeds provisions). NCO as a percentage of average loans is the standard credit-quality benchmark across the banking industry.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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