Ohio Bank Secures Financing To Weather Mortgage Crisis
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Tuesday, April 22, 2008
CLEVELAND, April 21 -- National City, the nation's 10th largest bank, announced Monday that it had secured a $7 billion capital infusion from equity investors to help it survive the home mortgage crisis, at least temporarily quashing speculation that it would have to be sold.
The move did not appease investors, however, who sent National City's stock tumbling 28 percent to its lowest level in about 17 years after the bank also posted a $171 million first-quarter loss and slashed its dividend.
National City said it secured $985 million from Corsair Capital in New York, which has international experience with troubled financial institutions. The rest will come from other investors, including current institutional shareholders.
The bank, which operates largely in the Midwest, cut its dividend to 1 cent per share from 21 cents to help strengthen its capital position.
National City chief executive Peter E. Raskind said in an interview that the bank's board explored a wide range of options and unanimously concluded that the capital infusion was in the best interest of shareholders.
Raskind told analysts in a conference call that the infusion will help stabilize the bank.
"It reassures customers we are here for the long haul," he said.
On April 1, the company hired New York investment bank Goldman Sachs to look into strategic alternatives. Analysts thought one option was putting National City up for sale, and several banks were viewed as potential buyers.
Raskind would not comment on whether any potential buyers were considered.
National City is raising money during the deterioration in the credit and mortgage markets that has plagued banks since the middle of 2007 and cut into capital positions.
"We came into this period with somewhat more exposure to residential real estate than some, and therefore we feel the stress somewhat more," Raskind said.
Oppenheimer analysts Terry McEvoy and Erik Zwick said in a report Monday that a merger involving National City still might happen.
