Skip to content

National City to Set Aside $700 Million for Loan Losses in Fourth Quarter

National City Corp. said today in a Securities and Exchange Commission filing that it expects to set aside around $700 million for loan losses in the fourth quarter, but signaled that the worst could be over.

The bank noted that as of the end of November, no additional losses “of significance” were expected and that the majority of loans in its warehouse could likely be sold.

However, the Cleveland-based bank and mortgage lender warned that its mortgage business “continues to be under stress,”, and revealed mortgage-related charges of $200 million incurred during October and November that will be realized in the fourth quarter.

Specifically, home equity loans and non-prime mortgages moved to its balance sheet from two current and former units during the third quarter deteriorated beyond the $361 million loan loss provision it previously announced at the end of the third quarter.

“Risk continue(s) to be in the run-off portfolios of First Franklin non-prime mortgages,” the bank said in its filing.

National City sold its subprime mortgage unit First Franklin Financial to Merrill Lynch last December for $1.3 billion, but kept $10 billion of loans that it continues to dump off.

Total charge-offs increased to $102 million in November from $87 million in October, with roughly half tied to residential mortgages and home equity products.

That represents a 13 percent increase from the $45 million in October and more than double the $21 million written off during November 2006.

In October, the bank cut its correspondent lending division and announced 2,500 job cuts as part of an aggressive cost-cutting review.

Shares of National City rose 66 cents, or 3.97%, to $17.28 in midday trading on Wall Street, just above their 52-week low of $16.43.

Leave a Reply

Your email address will not be published. Required fields are marked *