By Jonathan Stempel and Sweta Singh

BANGALORE (Reuters) - KeyCorp (KEY.N: Quote, Profile, Research), a large U.S. Midwest regional bank, said mounting loan losses could cause net charge-offs to double from its prior forecast, causing its shares to tumble to a new year-low.

The bank's shares were down $2.65, or 12.1 percent, at $19.30 in afternoon trading on the New York Stock Exchange. The KBW Bank Index , which includes KeyCorp, was down 3.2 percent.

In a filing late Tuesday with the U.S. Securities and Exchange Commission, the Cleveland-based bank projected full-year net charge-offs in the range of 1 percent to 1.3 percent, up from its prior forecast of 0.65 percent to 0.90 percent.

KeyCorp said net charge-offs in the second quarter and possibly the third quarter could be higher than the new range, citing exposure to residential homebuilders, and in its education and home improvement loan portfolios.

"The disclosure is bad news," wrote Scott Siefers, an analyst for Sandler O'Neill & Partners LP. "Key simply happens to be among the first so far to increase its net charge-off guidance, and as time goes on, we would expect similar deterioration to impact many others."

Many U.S. banks have struggled with mounting credit losses as the economy slowed and housing market slumped, making it more difficult for many borrowers to keep current on their debts.

KeyCorp spokesman William Murschel declined to immediately elaborate on the filing.

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