To assess the credit quality of a bank's loan portfolio at a point in time, and to assess how this has changed over time, there are a number of key ratios that could be considered.

However, there are some differences to note here with regards to IFRS and US GAAP.

Looking at US GAAP, the first ratio we've got is the loan loss ratio. For US banks, this is typically reported as the net charge-offs divided by the average total loans for the year.

Net charge-offs is the number of new incurred loan losses. So it's gross charge-offs minus any recoveries made on previously charged-off or written-off loans. This measures the level of realized credit losses that a bank has suffered during a period, which means that an increasing loan loss ratio is an indication of increasing credit losses in the last period.

This provides insights into the current situation of the lending quality of a bank, in other words, the riskiness of its loan portfolio at the moment, and during downturns, provides information on the resilience of a loan portfolio to the prospect of increasing credit losses.

Another ratio that is useful in understanding a bank's credit quality is the non-performing loan ratio, which is calculated by dividing the level of non-performing loans by total loans.

Non-performing loans are typically those with over 90 days of delinquency, but this is not always the case and can be determined by a bank on a case-by-case basis.

Increases in this ratio mean that a greater proportion of a bank's loans are effectively in default.

Finally, the allowance coverage ratio tells us about the link between expected losses and non-performing loans. This can also be calculated with reference to the total assets of the bank.

The current expected loss provision captures the expected future losses on all loans currently on the bank's balance sheet.

Comparing this to the level of non-performing loans tells us about the link between current losses and future expected losses. An increase in the allowance coverage ratio could indicate either that more loans are being issued or that issued loans have become more risky, increasing the current expectation of future losses, or alternatively, that there has been a reduction in the level of currently non-performing loans.