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National City posts $1.8B 2Q loss
ASSOCIATED PRESS
Jul 24, 2008
CLEVELAND - Regional bank National City Corp. today reported a huge loss for the second quarter, as mortgage loans soured and it took a big charge related to previous acquisitions.For the quarter ended June 30, the bank reported a loss of $1.76 billion, or $2.45 per share, compared with a profit of $347 million, or 60 cents per share, in the second quarter of 2007.
The results included a $1.1 billion goodwill impairment charge related to previous acquisitions. Goodwill typically reflects the value of an intangible asset such as a brand name.
Excluding the goodwill charge, the loss was 94 cents per share, according to a National City spokeswoman.
That compares with a loss of 26 cents per share, on average, expected by analysts polled by Thomson Financial. Analysts typically exclude onetime charges from their estimates.
The bank posted a net interest expense of $571 million, compared with net interest income of $951 million for the prior-year quarter. The figure represents the difference between how much it costs a bank to borrow money and how much it receives from lending money to customers. The loss reflects part of the impact the mortgage crisis is having on the bank.
Noninterest income, or earnings from things like fees and charges, fell to $431 million from $764 million last year.
The bank increased its provision for loan losses, or money set aside to cover bad loans, more than tenfold, to $1.59 billion, from $145 million last year. National City said the larger provision reflects additional loss reserves for loans secured by residential real estate, including a $478 million supplemental reserve on loan holdings it is liquidating, including construction loans to individuals, and broker-sourced nonprime mortgage and home equity loans.
Net charge-offs, or loans written off as unpaid, shot up to $740 million, more than seven times the $98 million in the 2007 quarter. National City said $527 million of the charge-offs reflected consumer loans associated with products or origination channels, like broker-sourced subprime mortgage loans and construction loans to individuals, that it no longer handles.
Nonperforming assets more than tripled to $3.13 billion, from $848 million last year.
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