Cleveland-based bank National City Corp. said Wednesday that third-quarter profits were down 80 percent, largely due to mortgage losses.
The firm announced third-quarter net income of $106 million, or 18 cents a share, compared to $526 million, or 86 cents a share for the same period last year.
Analysts polled by Thomson Financial expected the regional bank to report operating earnings of 32 cents a share.
National City reported a $152 million loss in its mortgage-banking business, mainly due to a deteriorating secondary mortgage market and rising delinquencies.
“Higher loan loss provisions were taken on portfolio mortgage loans, reflecting recent delinquency and loss trends, and continued deterioration in the housing markets,” the firm said.
National City said loan loss provisions leapt to $361 million in the third quarter of 2007, up from $143 million in the second quarter, marking a huge increase from the $73 million in the third quarter a year ago.
Net charge-offs rose to $141 million in the third quarter, up from $117 million during the same period last year.
During the third quarter, the bank essentially stamped out all non-traditional lending practices, including subprime lending.
As a result of the mortgage crisis, National City announced that it will be cutting 2,500 jobs companywide, though yesterday they were described as “noncustomer or nonrevenue-generating areas”.
“Based on the difficult conditions in the financial markets, which we expect to persist into 2008, we have undertaken an aggressive review of our cost structure across the company,” the firm said.
“That review, coupled with our 2008 budget process, has resulted in the elimination of approximately 2,500 positions representing approximately $125 million of personnel expense,” it concluded.
Yesterday, National City shut down its correspondent lending division, though there doesn’t seem to be mention of it in the mainstream media.
And in August, National City shuttered its home equity loan division National Home Equity as demand for second mortgages took a dive.
At this point, it’s a wonder what they have left in the way of their mortgage business.
Shares of National City were off $1.26, or 5.27% to $22.65, dipping below their 52-week low on the news.