Credit quality

The Cleveland-based regional bank was not well positioned for the sharp rise in interest rates last year. But executives say the year ahead will be different, pointing to strong credit quality and a repricing of Key's securities portfolio.

The 10 largest credit unions in the nation all saw surges in credit card charge-offs in the third quarter, as a growing number of consumers struggle to make ends meet.

But high costs and any downturn in the economy could weigh on lenders and their commercial borrowers in coming months, economists caution.

Washington Trust shares plunged after the Westerly, Rhode Island, company disclosed it booked an office deal in the third quarter, boosting the size of its portfolio while other lenders are pulling back.

Worried about the economy and new Fed rules on capital, the bank wants to hang onto its money just in case, CFO Daryl Bible told investors as he outlined second-quarter earnings.

The Federal Reserve governor said consumer credit delinquency is returning to pre-pandemic levels, indicating a potential softening of economic activity.

Lenders are bracing for more companies to fall behind on their loan payments. That could create more opportunities for banks to dispose of these nonperforming credits through an Article 9 sale.

Banks with strong underwriting and stress testing should be well positioned to survive the credit and liquidity issues that may come while being able to continue to serve customers.

A reasonable approach to comprehensive credit risk management can protect banks against the impact of a recession while ensuring the industry doesn't contribute to any potential economic volatility.

Cleveland-based KeyCorp posts a subdued profit in the wake of a loan loss provision that was more than six times greater than the level of fourth-quarter net charge-offs.

Overdue loans for U.S. credit unions hit 0.42% in June — the lowest level in the industry's history. But some warn of deteriorating credit quality as the economy sours.

Late-payment rates are rising at nonbanks that lend to people with lower credit scores. "We're probably entering a stretch where you're going to see a separation between those that are relatively good underwriters and those that are not," one analyst said.

The Buffalo, New York, bank flagged urban hotels and construction projects as potential sources of trouble. “But there’s nothing that’s flashing red right now that says there’s a big crisis coming,” said a top executive.

Credit quality at the largest U.S. bank by assets remains strong for now, but a top executive issued a warning about what may lie ahead.

U.S. lenders issued more credit cards than ever last year, with a growing share of them going to consumers with lower credit scores.

Comerica, which focuses on the energy sector, reported strong payment trends last quarter, while M&T, which concentrates more on real estate, showed deterioration. The divergence reflects varying exposures to sectors hit hard by the COVID-19 recession.

While customers of the nation’s largest bank are spending more, an unusually small percentage of their purchases are becoming debt. Executives warn that the bank’s predicament could persist for the rest of the year.

Bankers insist borrowing will pick up on the back of a post-pandemic economic recovery. But so far there are few signs of a rebound, and analysts are skeptical one is imminent.

Only 0.9% of mortgage borrowers are currently at least 90 days delinquent. That figure could rise as high as 3.8% once pandemic-related deferrals lapse — still well below the 6% mark reached after the Great Recession, according to research by the New York Fed.