Is National City Next to Go?

September 29, 2008 No Comments »

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Shares of Cleveland, Ohio-based bank and mortgage lender National City plummeted in early trading Monday as investors pondered the next great collapse.

With the company now trading at all-time lows, interim National City CFO Thomas Richlovsky was prompted to speak up about the bank’s current situation.

He told Cleveland.com that the bank was a different beast than Wachovia, with absolutely no option-arm exposure, and called the recent trading activity “irrational.”

That may be true, but the bank did dabble quite largely in home equity loans, many of which were used to finance properties at the height of the boom with zero down.

And now the company is stuck with about $17 billion in mortgages it would prefer to dump off, but is unable to given the current market dislocation.

Interestingly, Oppenheimer & Co. analyst Terry McEvoy upgraded the stock today to “outperform” from “perform” and raised his price target to $5, tying the recent sell-off to the collapse of WaMu and not so much the quality of the bank’s assets.

Earlier this year, National City appeared likely to sell itself, but instead raised capital to offset record mortgage losses.

Over the past year and change, the bank has shuttered its home equity, correspondent, and wholesale mortgage divisions, resulting in thousands of layoffs.

Shares of National City were down $1.71, or 46.09%, to $2.00 in late morning trading on Wall Street.

In related news, Fifth Third Bank saw its share price plummet $7.05, or 43.63%, to $9.11 in a rough day of trading Monday.

(photo: crystl)

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