National City Corporation (NYSE: NCC), headquartered in Cleveland, Ohio, is one of the nation's largest financial holding companies. The Company, though it's principal subsidiary National City Bank, operates an extensive banking network in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania, and Wisconsin, and also serves costumers in selected markets nationally. Primary business activites include commercial and retail banking, mortgage and asset management. Visit NationalCity.com for more information.
I believe the opening statement says a lot about who National City is and exactly why NCC's present stock price (currently $3.82) has dropped from a 55 week high of $33.54. Keep in mind, 6 months ago, NCC was the US' 8th largest U.S. bank. Wisely National City no longer offers the current daily quote for NCC's stick price on their splash page.
While CFO and Vice Chairman Jeff Kelly has been asked to step down (ok retire) and several other C' level executives (including CEO Peter Raskind) have also been rumored to consider early retirement, it appears all is lost for this once proud intuition.
It's easy to pick on someone when they are down. So I don't give additional props to such characters as widely watched tv televangelist Jim Cramer and his Mad Money show (http://www.cnbc.com/id/15838459 & http://www.cramers-mad-money.com/) along with many, many others who (correctly so), shown National City ZERO love as this struggling entity trys valiantly to stay afloat. So what happened? Was NCC' so mismanaged that despite their efforts to explain otherwise see (http://biz.yahoo.com/prnews/080714/clm098.html?.v=71) that they indeed are the next to fall? Are we going to find out that there was an exploit of this firm in the way Enron and others have come to light? The answer may be a little of both.
To understand what currently and has happened to NCC, one need not look at volumes of their financial records, trading account, negotiated execution levels through their various trading partners or even their C' level expense accounts. NCC is a humble company with humble leadership. Corporate expanses are tightly controlled and waste is looked down upon. What happened to NCC can be derived by simple economic fundamentals (mostly outside the CEO and Board's control) and a few poor decisions. Allow me to opine further.
Well before the national liquidity crisis which halted (for all intense and purposes) the fixed income mortgage markets in August of 2007, NCC was in trouble. It's mortgage unit (once a top 6 player nationally) had fallen due to new market participants, poor product placement, lack of technology, poor service times, as well as a weak marketing and branding effort. The banking unit found it's deposits slowing and reversing in key states such as Ohio, Indiana and Michigan. NCC leadership witnessed these events and to their credit looked to expand their banking arm to sunnier states such as Florida and Illinois. As illustrated below, NCC was concentrated in markets which were troubled prior to any bubble bursting. National City's mortgage unit drove a significant amount of revenue to NCC's bottom line. In order to understand the health of the mortgage market and capture credit conditions, one has to look at the dynamics for the entire market. Many other measures simply reflect certain parts of the process, and can vary significantly based on local conditions. A heat map reflecting Q3 mortgage late's and foreclosures are shown below (sorry the images aren't great).
There are few other charts worth mentioning. I think you'll begin to see my agreement.
National City based its growth out of the rust belt focusing on auto, manufacturing and steel. It has been well documented that these industries are in trouble. Unlike Comerica who moved their headquarters out of Michigan to Texas, NCC choose to ride it out and make the best of it's markets. While other banking institutions were focused in 2006 and 2007 on depository growth, NCC through it's marketing efforts was fee' based. This was the wrong decision and can be blamed on executive management. The fact that the banking footprint for NCC is an absolute albatross is not their fault. While several of it's competitors Key Bank and 5th Third choose to extend their efforts on commercial lending not residential, it does not bode well for NCC's C group to not aggressively expand into other markets. Playing Monday morning quarterback is easy given the executive decisions made by NCC over the past 18 months. It should be noted and understand the challenges NCC's leadership has to work with. 2006 was a highly robust year for the US economy and the mortgage industry (NCC's so-called cornerstone). To properly respect the challenges the bank was facing (prior to this present day economic challenges), I'll leave you with the unemployment totals for 2006'. You need income earning clients to fund aand grow a bank.
2006 Unemployment Totals
UNITED STATES 4.60
1 HAWAII 2.40
2 UTAH 2.90
3 NEBRASKA 3.00
3 VIRGINIA 3.00
5 MONTANA 3.20
5 NORTH DAKOTA 3.20
5 SOUTH DAKOTA 3.20
5 WYOMING 3.20
9 FLORIDA 3.30
10 IDAHO 3.40
10 NEW HAMPSHIRE 3.40
12 ALABAMA 3.60
12 DELAWARE 3.60
12 VERMONT 3.60
15 IOWA 3.70
16 MARYLAND 3.90
17 LOUISIANA 4.00
17 MINNESOTA 4.00
17 OKLAHOMA 4.00
20 ARIZONA 4.10
21 NEVADA 4.20
21 NEW MEXICO 4.20
23 COLORADO 4.30
23 CONNECTICUT 4.30
25 ILLINOIS 4.50
25 KANSAS 4.50
25 NEW YORK 4.50
28 GEORGIA 4.60
28 MAINE 4.60
28 NEW JERSEY 4.60
31 PENNSYLVANIA 4.70
31 WISCONSIN 4.70
33 MISSOURI 4.80
33 NORTH CAROLINA 4.80
35 CALIFORNIA 4.90
35 TEXAS 4.90
35 WEST VIRGINIA 4.90
38 INDIANA 5.00
38 MASSACHUSETTS 5.00
38 WASHINGTON 5.00
41 RHODE ISLAND 5.10
42 TENNESSEE 5.20
43 ARKANSAS 5.30
44 OREGON 5.40
45 OHIO 5.50
46 KENTUCKY 5.70
47 DISTRICT OF COLUMBIA 6.00
48 SOUTH CAROLINA 6.50
49 ALASKA 6.70
50 MISSISSIPPI 6.80
51 Michigan 6.90
The following websites were used in preparing this blog:
National City Bank http://www.nationalcity.com/
Mortgage Bankers Association http://www.mortgagebankers.org/
Housing America http://www.housingamerica.org/
National Mortgage News Online http://www.nationalmortgagenews.com/
Reuters http://www.reuters.com/
US Census - Government Link
US Treasury http://www.ustreas.gov/
