National City is Crashing

The victims of the bubble burst are rolling over and dropping rain, there’s a new one every day and today it’s likely National City Corp.. The Cleveland bank indulged in subprime lending as the bubble expanded and is now upchucking the ill-gotten feast.

Shares of National City Corp. crumbled to an all-time low as investors appeared to be looking anew for the financial crisis’ latest victim following Washington Mutual Inc.’s federal seizure.

Bearish investors focused Wachovia Corp. in premarket trading Friday — its stock was recently off 28% to $9.83 — and then apparently set their sights on National City.

The Cleveland-based bank’s stock was subjected to intense selling pressure. It was down 40% to $3 and earlier reached an all-time low of $2. Volume topped 155 million shares at early afternoon, six times the daily average.

One would normally call that exhaustion volume meaning exhaustion of sellers, but clearly the only thing exhausted today or national cities last chance of remaining independent. In fact lacking a bailout the bank finished the day seeing its shares hammered by over 50%.

Shares of National City Corp dropped more than half on Monday as investors wondered which regional bank might need a merger partner as the sector suffered what analysts called a deepening crisis of confidence.

The big Ohio bank slid $2, or 52 percent, at $1.70 on the New York Stock Exchange. The stock fell more than 25 percent on Friday.

For its part management blames the crash in share prices on a confidence crisis.

National City said in a press release it was better capitalized than Washington Mutual and Wachovia and had less exposure to troubled mortgage loans. The bank also said it had no intention or need to raise additional capital.

Well for its sake it’s a good thing they have no intention to raise capital because as bad as they need it and no one will give it to them, and until the Securities and Exchange Commission bans lack of confidence investors and depositors alike are well advised to lack confidence in NCC. This is from their fourth-quarter report.

National City’s Disney Land approach to financial reporting ran into the brick wall of reality as the bank reported its fourth consecutive loss at nearly $2B. The losses came neatly packaged with an increase in loan loss provisions to $1.6B from $145M in the second quarter of last year. Net charge-offs also jumped to $740M as the company raised an additional $7B in cash on top of the $2B it has already raised. The loan loss reserves increased ten fold to $1.69B from $145M. With $940M already written down so far and $3.3B of Level 3 remaining, you can see there’s a lot more on the way. That’s what the ten fold increase in loan loss reserves is all about.

It is just not very confidence inspiring no matter how you slice it.

And on the other side of the scam as the smaller become lesser, the big are getting bigger. That spells consolidation MONOLOPY and whether it is a conscious conspiracy or just one of convenience its prototype pray is regional banks just like National City.

The biggest banks are getting too big to fail,” said William Larkin, fixed income manager at Cabot Money Management in Salem, Mass.

“That’s going to be an issue going forward because obviously there’s going to be some new, heavy regulation coming down the pipeline.”

Weakened and in the way of bigger fish spell something house Bad News.National City could be the next to collapse or reasons found strictly on its own balance sheet alone. But in an environment where investors and depositors and FDIC officials panicked alike there is extra balance sheet reasons to keep your eye on National City Corp..