Page 7 - Bank Financials (I)
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Net Charge-Off Ratio:
A close cousin of the NPL ratio, the NCO ratio measures
what happens after loans actually default, triggering a
bank’s obligation to charge the loans off against its capital.
Because this metric factors in the recovery of collateral, a
bank’s NCO ratio should be smaller than its NPL ratio. If not,
the bank probably isn’t focusing enough on collections.
