National Citys Implosion Implications

By Tony, Bank Implode

For National City Corp. pathway to insolvency was a well paved highway. In business since 1845 and highly profitable at the height of the housing bubble in 2006 the Cleveland-based bank got caught in the shock wave of the bubble burst and imploded dropping onto the balance sheet of PNC with barely a thud. The end came with stunning swiftness for the bank which was once the 11th largest by deposits in the United States, it was acquired by PNC for fraction what had been its market value.

PNC Financial Services Group Inc., Pennsylvania’s biggest bank, plans to buy National City Corp. for about $5.2 billion in stock after receiving U.S. Treasury funds.

PNC will pay $2.23 a share, 19 percent less than National City’s closing price yesterday, to create the fifth-largest U.S. bank by deposits, the Pittsburgh-based lender said today in a statement. The $7.7 billion of Treasury funding, part of the government’s $250 billion plan to recapitalize banks, “put this transaction on a very solid footing,” PNC said.

National City, once among the nation’s top 10 subprime lenders, joins Washington Mutual Inc. and Wachovia Corp. in submitting to takeovers after losses tied to failed home loans. Cleveland-based National City lost more than $3 billion during the past five quarters, and its stock plunged 87 percent this year. PNC is still profitable. Read more….