CHICAGO - National City, Ohio's largest bank, this week announced it has raised $7 billion in cash that is expected to allow the financially struggling bank to avoid a sale as it continues to take heavy losses from the collapse of the subprime mortgage market.
The bank announced the capital plan the same day it released first-quarter financials that showed a loss of $171 million, primarily due to loan losses of up to $1.4 billion for the quarter, compared to $122 million in loan losses for the first quarter of last year. The bank said another $1.8 billion in loans were at least 90 days past due as of March 31, 2008. NatCity is one of the nation's busiest mortgage lenders.
Private equity firm Corsair Capital LLC and some of NatCity's existing large institutional investors will provide the $7 billion.
The capital plan comes about a month after the bank announced it had hired an advisory firm to help it consider "strategic alternatives," including a possible sale. Two Ohio competitors - Cincinnati-based Fifth Third Securities Inc. and Cleveland-based KeyCorp - were reported to be top candidates to acquire the bank.
Unlike the bank's corporate and deposit business, the public finance department that is part of its broker-dealer subsidiary NatCity Investments Inc. is relatively small, with only a handful of bankers in the Cleveland office, according to a source. NatCity representatives did not return calls.
The bank has shrunk its municipal department over the last few years after a short-lived expansion plan in early 2005. Last year it ranked 14th in Ohio among senior managers on $289 million of debt and 27th in the Midwest, senior managing $634 million of bonds, according to figures from Thomson Reuters.