CHICAGO - After taking a financial beating related to subprime mortgage market fallout, National City, Ohio's largest bank and one of the nation's top mortgage lenders, announced this week it has hired an advisory firm to consider its "strategic alternatives," including a possible sale.
If acquired by another Ohio bank - such as Cincinnati-based Fifth Third Securities Inc., which is reported to be a top candidate to acquire the bank - the move would create one of the largest banks in the Midwest, and the sixth largest in the nation.
Cleveland-based NatCity has assets of $150 billion, while Cincinnati-based Fifth Third reports assets of $100 billion - roughly the same amount as Cleveland-based KeyCorp, which is reportedly also in talks with the firm. NatCity operates in Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri, and Pennsylvania.
In contrast to its corporate and deposit business, however, the bank's public finance department that is part of it broker-dealer subsidiary NatCity Investments Inc. is relatively small with only a handful of bankers in the Cleveland office, said a source. A bank representative did not return calls.
Goldman, Sachs & Co. is acting as adviser with the bank on a possible transaction. Besides the two Ohio banks, other suitors are said to be JPMorgan Chase and a handful of foreign banks, including Canada's Scotiabank.
After positioning itself over the last several years as one of the top home mortgage lenders in the country and expanding into Florida, which has been exceptionally hard hit by a declining housing market, the bank reported losses of $333 million for the fourth quarter.
It currently holds up to $25 billion in additional so-called high-risk assets, according to reports. In response to its increasing financial troubles, the firm's stock has dropped from a high of $38 in May 2006 to a low of $6.56 in recent weeks.
An acquisition is one of several moves the firm could make to raise capital - others include cutting its dividend or selling off some assets. An announcement is expected before April 22, when the bank is scheduled to release its quarterly earnings.
NatCity has shrunk its municipal department over the last few years after a short-lived expansion plan in early 2005. The firm in 2005 expanded into two Midwestern states after years of confining most of its municipal business to Ohio. The company hired five bankers, an analyst and several administrative assistants to staff two new offices in Detroit and Indianapolis.
But less than two years later, NatCity closed both offices, saying it wanted to focus on those regions and sectors where it was already a top performer. The expansion was overseen in part by then-public finance head Dennis Golem, who a few months later was replaced by Cameron Mitchell, the firm's head of public finance today, according to a source.
NatCity last year ranked 14th in Ohio among senior managers on $289 million of debt and 27th in the Midwest, senior managing $634 of bonds, according to figures from Thomson Financial. So far in 2008, the firm ranks 14th in the region, with $237.5 million in business. Nationally the firm ranked 42nd in 2007, with a total of $890 million in work.
Its top Ohio competitor - and now suitor - Fifth Third ranked 11th as senior manager in the Midwest last year, with $2.4 billion of work and 3rd in Ohio with $1.3 billion.