Ohio-based National City sale follows 2-year slide - GoFuckYourself.com

Barefootsies · 10-24-2008, 03:46 PM

CLEVELAND -

Two years doesn't seem like much in the life of a bank founded in 1845. But since 2006, National City Corp. went from being highly profitable to being a troubled institution that was sold for a fraction of what had been its market value.

Pittsburgh-based PNC Financial Services Group Inc. (nyse: PNC - news - people ) said Friday it is acquiring National City (nyse: NCC - news - people ) for $5.58 billion. Shortly before, PNC received approval for $7.7 billion in cash from the federal government which is trying to relieve the nation's credit crisis.

The acquisition, expected to be completed by Dec. 31, makes PNC Financial the nation's fifth largest bank as measured by deposits.

National City, Ohio's largest bank, long has been a business and civic pillar of Cleveland with a downtown headquarters that stands out on the city's skyline.

"It is too early to know what the impact on the city will be in terms of jobs, the number of branches and tax revenue," said Mayor Frank Jackson said. "After finding this out, I was walking around downtown and having some conversation with some of the National City employees. Really, the uncertainty this is producing in their lives is probably the most troubling part of this whole transaction."

This week, National City posted a loss of $729 million, or 85 cents per share. The company also said this week that it has plans to cut 4,000 jobs, or about 14 percent of its total work force, to reduce costs.

The sale culminates National City's stunning two-year decay amid the nation's credit crunch and troubled mortgage market. National City had tied its future largely to mortgages, many which were sought by brokers in deals that proved to be high-risk.

The announced deal resulted in a day of mixed emotions within National City, spokeswoman Kristen Baird Adams said Friday.

"Our board, after an extensive review, determined that the best way to protect and further enhance the value of our franchise for all of our stakeholders was to enter into a transaction as we announced," she said.

National City shares closed Friday down 68 cents, or 24.7 percent, to $2.07. Two years ago, National City shares were worth $36.93.

On Oct. 17, 2006, National City reported net income of $551 million, or 90 cents per share, for that year's third quarter. It was a 15 percent improvement over the earnings in the same quarter of 2005.

David A. Daberko, who in 2006 was National City's longtime chairman and CEO, explained in that positive financial report that corporate and retail banking businesses were strong, while the mortgage-related business was "performing well in a cyclically tough mortgage environment."

But early signs of trouble were indicted in its provision for credit losses, posted at $73 million, up from $60 million in the preceding quarter.

Just a few weeks later, on Nov. 9, 2006, National City announced a revision of its third-quarter 2006 earnings from 90 cents per share to 86 cents per share, in part to reflect a higher estimate of reserves for repurchased mortgage loans and a lower value of mortgage servicing rights.

Its struggles eventually worsened, as other banks across the nation also struggled.

To deal with its serious financial issues, about six months ago National City secured a $7 billion capital infusion from equity investors. That move announced April 21 was made to help the bank try to survive a spreading mortgage crisis and avoid sale.

National City as recently as this week said its capital base was strong enough to allow it to function normally.

"This news, even though disappointing, was known to be a possibility really based on the financial and economic crisis not only in the United States but throughout the world," said Jackson, who spoke with leaders of National City and PNC on Friday.

Jackson said he believes that National City CEO Peter Raskind did all he could to preserve the bank in Cleveland.

The mayor said he hopes to meet with PNC Financial officials to express what National City has meant to Cleveland, including community investment and philanthropic activity.

"These are very difficult and challenging times. Things are in transition, but when the dust settles Cleveland will still be here. We will survive and we will be stronger at the end of the day," Jackson said.

Customers at a downtown National City branch on Friday said the sale means the city will change.

"Part of Cleveland is going to be gone," said Margie Znidarsic. "I'd say we still have the Cleveland Browns, but let's not bring the Pittsburgh Steelers here."

John Grimes said it's "not going to be the same."

"It's like, this company has been around forever," he said. "They should have tried to save it."

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10-24-2008, 03:46 PM	#1
Barefootsies Choice is an Illusion Industry Role: Join Date: Feb 2005 Location: Land of Obama Posts: 42,635	Ohio-based National City sale follows 2-year slide CLEVELAND - Two years doesn't seem like much in the life of a bank founded in 1845. But since 2006, National City Corp. went from being highly profitable to being a troubled institution that was sold for a fraction of what had been its market value. Pittsburgh-based PNC Financial Services Group Inc. (nyse: PNC - news - people ) said Friday it is acquiring National City (nyse: NCC - news - people ) for $5.58 billion. Shortly before, PNC received approval for $7.7 billion in cash from the federal government which is trying to relieve the nation's credit crisis. The acquisition, expected to be completed by Dec. 31, makes PNC Financial the nation's fifth largest bank as measured by deposits. National City, Ohio's largest bank, long has been a business and civic pillar of Cleveland with a downtown headquarters that stands out on the city's skyline. "It is too early to know what the impact on the city will be in terms of jobs, the number of branches and tax revenue," said Mayor Frank Jackson said. "After finding this out, I was walking around downtown and having some conversation with some of the National City employees. Really, the uncertainty this is producing in their lives is probably the most troubling part of this whole transaction." This week, National City posted a loss of $729 million, or 85 cents per share. The company also said this week that it has plans to cut 4,000 jobs, or about 14 percent of its total work force, to reduce costs. The sale culminates National City's stunning two-year decay amid the nation's credit crunch and troubled mortgage market. National City had tied its future largely to mortgages, many which were sought by brokers in deals that proved to be high-risk. The announced deal resulted in a day of mixed emotions within National City, spokeswoman Kristen Baird Adams said Friday. "Our board, after an extensive review, determined that the best way to protect and further enhance the value of our franchise for all of our stakeholders was to enter into a transaction as we announced," she said. National City shares closed Friday down 68 cents, or 24.7 percent, to $2.07. Two years ago, National City shares were worth $36.93. On Oct. 17, 2006, National City reported net income of $551 million, or 90 cents per share, for that year's third quarter. It was a 15 percent improvement over the earnings in the same quarter of 2005. David A. Daberko, who in 2006 was National City's longtime chairman and CEO, explained in that positive financial report that corporate and retail banking businesses were strong, while the mortgage-related business was "performing well in a cyclically tough mortgage environment." But early signs of trouble were indicted in its provision for credit losses, posted at $73 million, up from $60 million in the preceding quarter. Just a few weeks later, on Nov. 9, 2006, National City announced a revision of its third-quarter 2006 earnings from 90 cents per share to 86 cents per share, in part to reflect a higher estimate of reserves for repurchased mortgage loans and a lower value of mortgage servicing rights. Its struggles eventually worsened, as other banks across the nation also struggled. To deal with its serious financial issues, about six months ago National City secured a $7 billion capital infusion from equity investors. That move announced April 21 was made to help the bank try to survive a spreading mortgage crisis and avoid sale. National City as recently as this week said its capital base was strong enough to allow it to function normally. "This news, even though disappointing, was known to be a possibility really based on the financial and economic crisis not only in the United States but throughout the world," said Jackson, who spoke with leaders of National City and PNC on Friday. Jackson said he believes that National City CEO Peter Raskind did all he could to preserve the bank in Cleveland. The mayor said he hopes to meet with PNC Financial officials to express what National City has meant to Cleveland, including community investment and philanthropic activity. "These are very difficult and challenging times. Things are in transition, but when the dust settles Cleveland will still be here. We will survive and we will be stronger at the end of the day," Jackson said. Customers at a downtown National City branch on Friday said the sale means the city will change. "Part of Cleveland is going to be gone," said Margie Znidarsic. "I'd say we still have the Cleveland Browns, but let's not bring the Pittsburgh Steelers here." John Grimes said it's "not going to be the same." "It's like, this company has been around forever," he said. "They should have tried to save it." http://www.forbes.com/feeds/ap/2008/...ap5604229.html __________________ Should You Email Your Members? Link1 \| Link2 \| Link3 Enough Said. "Would you rather live like a king for a year or like a prince forever?"