October 24, 2008 – 9:20 am

2008-10-24 –National City Implodes:

With write-downs and losses piling up and no possible means of generating earnings to fight back, National City Corp took an offer from the Treasury czar that it could not refuse. The bank has agreed to sell itself to PNC. And the price?? Chump change compared to what is was just two short years ago. <>

2008-10-21 -Q3 :

Here’s the tally thus far:

  1. Write-Downs/Charge-Offs: $940M + $844M = $1.784M
  2. Cash Raised: $9B + $0B = $9B
  3. Level III Assets: $?B
  4. Loan Loss Reserves: $1.18B

We now sum all the distresses to get National City’s current Misery Index of $14.9B + $12.0B = $26.9B

2008-10-09 – Up for Sale?:

National City Corp stock was up today on talk of a buyout, and that is the best news out there for the ailing regional bank.

2008-09-04 – H.E.L.O.C::

Freezing home equity lines of credit is another way of saying “buying them back.” Rather than freezing its customers’ HELOCs, National City is simply waving the $350 fee. Hey, an uncharged fee is also known in some circles as a payout.

2008-07-24 – Reality Strikes Q2:

National City’s Disney Land approach to financial reporting ran into the brick wall of reality as the bank reported its fourth consecutive loss at nearly $2B. The losses came neatly packaged with an increase in loan loss provisions to $1.6B from $145M in the second quarter of last year. Net charge-offs also jumped to $740M as the company raised an additional $7B in cash on top of the $2B it has already raised. The loan loss reserves increased ten fold to $1.69B from $145M. With $940M already written down so far and $3.3B of Level 3 remaining, you can see there’s a lot more on the way. That’s what the ten fold increase in loan loss reserves is all about. Here’s the tally thus far:

  1. Write-Downs/Charge-Offs: $200M + $740M = $ 940M
  2. Cash Raised: $2B + $7B = $9B
  3. Level III Assets: $3.3B
  4. Loan Loss Reserves: $1.69B

We now sum all the distresses to get National City’s current Misery Index of $14.94B

2008-07-14 – Denial:

It has been ably demonstrated by Northern Rock, Bear Stearns, CountryWide, Lehman Brothers, Merrill Lynch, Fannie Mae and Freddie Mac that denials of liquidity problems are a sure sign of just that: big time problems. Now National City proves it for themselves.

2008-06-06 – On Probation:

National City’s dead man stumbling has drawn the attention of federal regulators who are telling the bank to straighten up.

2008-04-21 – Dead Man Stumbling:

We said that it would take a lot more (money that is) to get National City off death watch, and a lot more is what the bank might get:

National City Corp., Ohio’s biggest bank and subprime lender, may get $6 billion to $7 billion from a group led by Corsair Capital LLC to bolster its balance sheet, said a person with knowledge of the situation.


It is going to take a lot more than the $530M bandaid gained on the VISA IPO to remove National City from death row’s watch. For the tenth largest US bank by deposits, that won’t even cover the $700M it expects to set aside in the fourth quarter to cover bad loans, let alone the $200M charge related to the declining value of mortgage securities.

In the bank’s 2007 annual report, new CEO Peter Raskin stated:

As you know, 2007 turned out to be a very difficult year for National City. Severe disruption in the mortgage, housing and credit markets that developed throughout the second half of the year led to significant losses in our mortgage business, which dramatically weakened results for the company overall.

While it’s true that the weakened housing and credit markets made the most dramatic impact on National City in 2007, the crime for which it now faces the gallows was committed in 1999. That’s when former chief executive David Daberko changed the bank’s business mix by accumulating higher-yielding, but riskier, loans (most notably subprime mortgage loans). 1999 is the year National City bought the original sin of subprime originators: First Franklin Financial. Witness:

Rather than issuing mortgages and selling them off to investors, National City began in 2000 to hold a portion of its First Franklin loans in its loan portfolio. A big portion.

Mr. Daberko explained the strategy in a letter to shareholders in 2001: “These loans are readily salable to third parties at a premium to origination cost but have greater lifetime value when held on the balance sheet.”

At the time, the strategy was clicking.

It’s not so much that the strategy was clicking as it was that money was cheap — too cheap to last. So, as the Fed raised interest rates in 2005, National City’s profits plummeted under the avalanche of mortgage defaults and a crashing housing market. As the subprime scam was literally coming apart at the seams, National City was unwilling to admit guilt and unable to respond:

National City retained more than half of the $10.7 billion in loans First Franklin originated in 2002.

Still, he (Daberko) insisted mortgages “are an essential core banking product” at National City and stated, “We plan to be well positioned when conditions in the mortgage market improve, as they inevitably will.”

The first admission of guilt came more as an entrapment than a confession with National City selling First Franklin to Merrill Lynch on Dec. 30, 2006.

The subprime way turned out to be a one-way dead-end street from which there was no turning back, except ironically for the man who began it all, former CEO David Daberko. Mr. Daberko was able to get out (he retired); National City was not, and perhaps it’s not so ironic after all. But toward the shadow of the gallows, it’s not Daberko who’s the dead man walking, be it by bankruptcy or buyout or bailout. When the hangman’s gloomy voice calls, it is National City which takes a step closer.

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