National City posts 2Q loss of $1.8 billion
Pittsburgh Business Times - by Patty Tascarella
National City Corp., Cleveland, reported a net loss of $1.8 billion Thursday for the second quarter, more than 10 times the hit it took in the first quarter. Net income for the second quarter of 2007 was $347 million. National City (NYSE:NCC) posted a loss of $2.45 per diluted share, far worse than analysts' estimates of -26 cents; the company made 60 cents per diluted share a year ago.
Brought low by the subprime crisis and its troubled mortgage portfolio, National City has battled takeover rumors, talk of division sales and a skidding stock price that has traded at a range of $2.99 to $31.58. It is the second largest bank operating in the Pittsburgh area as ranked by deposits and has the largest number of branches.
Chairman President and CEO Peter Raskind said in a statement that National City made "significant progress ... in strengthening our balance sheet" during the quarter despite the "very challenging environment." He cited the $7 billion the financial institution raised in April to make sure it was strongly capitalized, a transaction that gave New York City-based private equity firm Corsair Capital a 9.9 percent stake in National City.
"Despite the problems with the subprime book, they have a better capital position than most banks," said Brian Koble, senior research analyst at Pittsburgh-based investment firm Hefren-Tillotson Inc. "But they raised the capital in such a way it causes losses for shareholders so the low share price we see is more reflective of what the capital arise did than any worries about insolvency."
Second quarter numbers were also down due to a $1.1 billion charge related to previous acquisitions.
National City still faces its share of challenges, Koble said.
The second quarter provision for loan losses was $1.6 billion; of that, $1 billion pertained to liquidating portfolios of brokered home equity, nonprime mortgage and construction loans. The quarter's provision for loan losses included supplemental reserves of $478 million. Raskind said National City expects the loan loss provision to decline during the remainder of 2008.
"But their core businesses seem to be performing well and most people are pretty happy with today's news," Koble said.
Raskind said National City continues to invest in its core businesses. Minus unusual and nonoperating items, National City said its pre-tax, pre-provision operating earnings were $610 million, up 19 percent from the first quarter of 2008, but down from $690 million for the second quarter of 2007.
ptascarella@bizjournals.com | (412) 208-3832
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