Friday, June 20, 2008, close

National City closed out the week right at $5.05.

National City's top guy in Missouri ditches

Shaun Hayes, president of Missouri Banking for National City Bank, is resigning from the company.

Hayes confirmed his plan and referred questions about the move to National City's corporate headquarters in Cleveland, where a spokesman for the billion-dollar bank, Todd Morgano, said Hayes last day with National City will be around June 30.

National City has not yet named a successor to lead the local market, Morgano said, adding that the bank will be looking for continuity and has a "strong bench" in St. Louis.

While at the same time, National City is expanding in Missouri:

National City currently is building a new full-service branch in Town and Country and plans to open four more branches locally by the end of next year, Hayes told the Business Journal in an interview last month. That would give Cleveland-based National City Corp. (NYSE: NCC) 65 St. Louis area branches by the beginning of 2010, more than double what it had in 2004 when it acquired Allegiant.

Source: MNS Money: Hayes resigning as head of Missouri Banking for National City

Tuesday, June 17, 2008 close

National City stock closed yesterday, Tuesday, June 17, 2008, at $4.73.

Berko on NCC

Malcolm Berko, a syndicated columnist, who writes on money matters, had an article about National City in my own hometown newspaper yesterday (link):

Dear Mr. Berko: I’m retired and thinking about taking a gamble with about $4,000 and buying 700 shares of National City Corp. What do you think of the stock and my idea? I believe the stock will turn around in four to six years and I might be able to triple my money. And if I triple my money in six years while the stock goes from $6 to $18, that’s a 20 percent annual return. — L.P., Des Moines, Iowa

Cutting to the chase:

But because you’re retired, I wouldn’t just buy the stock, I’d also consider the National City Capital Trust IV, 8 percent Preferred stock (NCC-C-$13.26) that has a 16 percent current return. This NCC-C pays in March, June, September and December, is callable at $25 and rated A3/BBB-plus by Moody’s and S&P. I’d suggest investing in 350 shares of the common (about $1,650) plus 100 shares of NCC-C. This creates a synthetic convertible preferred and while you wait five or six years for a potentially attractive recovery you’ll also be getting a 6.8 percent current return on a $3,000 investment.

That's probably not the advice the writer was looking for.

National City's CEO talks

National City Bank's chairman, Peter Raskind, explains some things to the Pittsburgh Post-Gazette (National City changes its strategy as it recovers from crisis):

Chairman Peter Raskind said National City Corp. has learned some lessons from the subprime mortgage storm that devastated the bank's share price and caught the attention of federal regulators.

"We will be operating the bank differently and better in the future," said Mr. Raskind, who also is president and CEO of Cleveland-based National City Corp.

It's not that we don't believe you, or want to believe you, but we've seen where people in charge will say anything in an effort to build confidence. Then, later, everyone finds out it wasn't true.

National City will return to its conservative roots, he said, scaling back its operation from a nationwide audience to a smaller footprint that is limited to the Midwest and the east coast of Florida.

The bank has gotten away from the aggressive mortgage-related investments that placed it in financial trouble when the housing market turned sour.

"We're in a part of the country that has slow growth," said Mr. Raskind. The previous strategy was to drive earnings growth by moving into hotter housing markets.

Is that what it was?

"I became CEO at the end of last July," he said. "A week later the mortgage markets and the capital markets began to melt down."

The fundamental challenge National City faces is a portfolio of unprofitable mortgage loans it has been unable to get off its books. The bank lost $333 million in the fourth quarter of 2007 and $171 million in the first quarter of 2008.

What does that $333 million consist of? Just the stock price? The article goes on to discuss the $7 billion intake from Corsair, and the memorandum of understanding with the Office of the Comptroller of the Currency and the Federal Reserve Bank.

"There is no reason for anyone to have a shred of doubt about the core stability and safety of the company and we hope the $7 billion in capital will underline that," Mr. Raskind said. "Customers should have no doubt of our ability or our desire to serve them well into the future."

Mr. Raskind declined to discuss what arrangement the bank has made with regulators and provided no clue of how long it might take to turn the bank around.

His words ring of reassurance. And, I'm sure he believes them. However, it's too soon to put too much stock into his statements. The article discusses the situation with the bank's stock price which was at $34.00 last year at this time, and the cutting of dividends.

The company has 32,000 total employees, with 3,000 employees in Western Pennsylvania. While its losses have led to hundreds of employees being laid off, the chairman said there have been very few if any job losses in Western Pennsylvania.

Mr. Raskind said some customers in Western Pennsylvania who have home equity loans with National City have had their home equity lines of credit frozen in recent months, but it had little to do with the bank's financial health or declining real estate values and more to do with the bank limiting its risk.

National City is very much still in the mortgage business, he said, but in a different and smaller way. For instance, the bank will no longer work through brokers.

"We've scaled back in terms of size and volume," he said. "The national [mortgage] businesses we were in are shut down. However, we still have the [unprofitable] mortgages to deal with.

"Now we are simply focused on doing the best job we can to minimize the losses on our liquidating portfolio of mortgage loans. We are carefully thinking through all alternatives available."

So, we now have reassurances to the stockholders, the employees, and the depositors. Sort of.

Monday, June 16, 2008, stock price

National City closed Monday, June 16, 2008, at $5.08.

Friday, June 13, 2008, close

National City closed out the week at $5.15.

Get ready for the long haul

Shares of National City Corp. rose Thursday after an analyst upgraded shares of the Cleveland-based banking company and said it has enough capital to weather the current credit crisis.

Sandler O'Neill & Partners LP analyst R. Scott Siefers upgraded the stock to "Buy" from "Hold" and said the company's capital cushion should support it in "virtually any credit scenario." In May, National City got a $7 billion capital infusion from equity investors.

Siefers said investors who build positions now will be well-rewarded, though it may take some time.

"It goes without saying that any bank stock investment in this market probably requires some patience and a strong stomach," Siefers wrote in a client note.

Siefers said the stock has declined to a point that "bears closer scrutiny" and thinks the company's capital affords it the flexibility to get through a very severe credit cycle without having to raise additional funds.

Shares of the company, which have dropped 73.6 percent so far this year, rose 67 cents, or 15.4 percent, to $5 in afternoon trading.

AP: Last Call: National City heads higher

Depositors can feel some relief, too.

NCC boosts S&P 500 yesterday

Some people can wipe the sweat of their collective brow:

Shares of National City Corp. jumped, helping lift the Standard & Poor's 500 Index on Thursday, after an analyst upgraded shares of the bank and said it has enough cash to weather the credit crisis.

National City added 89 cents, or 20.5 percent, to $5.23 after Sandler O'Neill & Partners LP analyst R. Scott Siefers raised the stock to "Buy" from "Hold" and said the company had enough capital for "virtually any credit scenario."

AP: S&P 500 Leaders and Laggards: NCC KEY

Thursday, June 12, 2008, price

On Thursday, National City stock rose 89 cents to close at $5.23. That's a 20.51% one-day increase. I wonder how many people bought before it hit $5.23. Well, Google finance says the volume was 0.00. That must be a typo.

(Source.)

NCC enters into agreement with Fed

I think we now know why the stock is at an all-time low. The Wall Street Journal is reporting that National City has:

[...] entered into memoranda of understanding with the Office of the Comptroller of the Currency and the Federal Reserve Bank of Cleveland on May 5 and April 29, respectively, effectively putting the bank on probation.

Chairman and Chief Executive Peter E. Raskind criticized the agreements' disclosure of late in the media. National City has been in focus as the regional bank has suffered significant impacts from the credit crisis, and the memoranda illustrate the growing regulatory pressure some financial institutions are under as they struggle to deal with fallout from the credit-market turmoil.

A glance at the stock price of a bank can be an quick indicator of where shareholders stand. On the other hand, the health of depositors' accounts isn't so easy to ascertain. At least, for some of us.

Under such agreements, which are entered into privately and aren't publicly disclosed, banks are given an opportunity to work with federal regulators to address serious financial problems without triggering alarm among depositors. Regulators usually urge banks to maintain adequate capital and improve lending standards.

Source: National City Confirms MOU With Regulators

And there you have it.

All this trouble stems from making risking loans in the subprime market.

Wednesday, June 11, 2008 price

NCC stock closed yesterday, Wednesday, June 11, 2008, at $4.34. (Source.)

I think this is an all-time low.