NCC downgraded by Merrill Lynch

From TradingMarkets.com, first thing this morning, National City downgraded to underperform at Merrill Lynch:

National City Corp. Wednesday was downgraded to underperform from neutral at Merrill Lynch, which cited "multiple headwinds," including incremental credit quality deterioration in the Midwest and an impairment of core earnings-per-share power.

Analyst Edward Najarian noted that National City has recently raised $7 billion in new capital at $5 per share, which should cover "abnormally high" credit losses expected in 2008-2010. However, Najarian said the new capital should cause shares outstanding to more than triple, thereby "massively" diluting earnings-per-share.

"At current levels, we don't think its credit risk and earnings-per-share dilution are fully reflected in the share price, though we do think the capital infusion should cover National City's high expected credit losses," Najarian said in a client note.

Merrill Lynch lowered its price objective to $4 from $5.

The firm cut its fiscal 2008 outlook to a loss of 85 cents a share from a loss of 80 cents a share.

Analysts polled by Thomson Reuters, on average, forecast a 2008 loss of 80 cents a share.

Ouch. Ouch. Ouch. I may not know much about this stock stuff, but I bet this is the last thing NCC's directors wanted to hear.

So, does this mean that the company has to actually perform?