Moody's downgrades National City (sr to A3); remains on review
New York, March 13, 2008 -- Moody's Investors Service downgraded the ratings of National City Corporation
(senior to A3 from A2) and subsidiaries, including its lead bank,
National City Bank (financial strength to C+ from B- and bank
deposits to A2 from A1). The ratings remain on review for possible
downgrade.
Moody's said that the downgrade reflects its expectation that National
City's very sizable second-lien home equity exposure will result
in significant losses that will further weaken National City's capital
position. In addition, Moody's expects material losses from
National City's commercial real estate exposure, in particular its
residential development and land loan portfolios, at roughly the
same time.
"National City has sizable exposure to asset classes that have experienced
noteworthy deterioration in the ongoing U.S. housing market
downturn," said Moody's Vice President and Senior Credit Officer,
Allen Tischler. "Weakening housing market trends imply that these
troubled portfolios could experience comparatively high loss severity,
which would negatively impact National City's capital metrics,"
said Mr. Tischler. Moody's notes that National City ended
2007 with a capital position below the average for similarly-rated
peers.
The ratings remain on review for downgrade because Moody's expectation
of significant losses indicates that National City is likely to face more
pronounced weakness in its capital position in the near-term.
The review will focus on management's flexibility in relieving this expected
capital pressure. Moody's notes that management has already taken
steps to bolster its capital position by halving its common dividend and
issuing two different hybrid securities in January 2008. In addition,
Moody's believes that National City's stake in the upcoming Visa IPO should
provide a material benefit to capital.
National City's ratings continue to be supported by its broad retail,
commercial and asset management businesses located in the Midwest.
National City's direct banking platform provides $54 billion of
low-cost core deposits, which enhances its earnings and overall
franchise value. Furthermore, Moody's considers National
City's parent and bank level liquidity profiles to be solid.
The following ratings were downgraded and remain on review for possible
downgrade:
..Issuer: First of America Capital Trust I
....Preferred Stock Preferred Stock,
Downgraded to Baa1 from A3
..Issuer: Merchants National Corp
....Senior Unsecured Medium-Term Note
Program, Downgraded to A3 from A2
..Issuer: National City Bank
....Bank Financial Strength Rating,
Downgraded to C+ from B-
....Issuer Rating, Downgraded to A2
from A1
....OSO Senior Unsecured OSO Rating,
Downgraded to A2 from A1
....Multiple Seniority Bank Note Program,
Downgraded to a range of A3 to A2 from a range of A2 to A1
....Subordinate Regular Bond/Debenture,
Downgraded to A3 from A2
....Senior Unsecured Deposit Program,
Downgraded to A2 from A1
....Senior Unsecured Regular Bond/Debenture,
Downgraded to A2 from A1
....Senior Unsecured Deposit Rating,
Downgraded to A2 from A1
..Issuer: National City Bank of Kentucky
....Subordinate Regular Bond/Debenture,
Downgraded to A3 from A2
..Issuer: National City Bank of Pennsylvania
....Subordinate Regular Bond/Debenture,
Downgraded to A3 from A2
..Issuer: National City Bank, Indiana
....Subordinate Regular Bond/Debenture,
Downgraded to A3 from A2
....Senior Unsecured Regular Bond/Debenture,
Downgraded to A2 from A1
..Issuer: National City Capital Trust I
....Preferred Stock Preferred Stock,
Downgraded to Baa1 from A3
..Issuer: National City Capital Trust II
....Preferred Stock Preferred Stock,
Downgraded to Baa1 from A3
....Preferred Stock Shelf, Downgraded
to (P)Baa2 from (P)Baa1
..Issuer: National City Capital Trust III
....Preferred Stock Preferred Stock,
Downgraded to Baa1 from A3
....Preferred Stock Shelf, Downgraded
to (P)Baa2 from (P)Baa1
..Issuer: National City Capital Trust IV
....Preferred Stock Preferred Stock,
Downgraded to Baa1 from A3
....Preferred Stock Shelf, Downgraded
to (P)Baa2 from (P)Baa1
..Issuer: National City Corporation
....Junior Subordinated Shelf, Downgraded
to (P)Baa1 from (P)A3
....Multiple Seniority Shelf, Downgraded
to a range of (P)Baa2 to (P)A3 from a range of (P)Baa1 to (P)A2
....Preferred Stock Preferred Stock,
Downgraded to Baa2 from Baa1
....Subordinate Regular Bond/Debenture,
Downgraded to Baa1 from A3
....Senior Unsecured Conv./Exch.
Bond/Debenture, Downgraded to A3 from A2
....Senior Unsecured Regular Bond/Debenture,
Downgraded to A3 from A2
..Issuer: National City Preferred Capital Trust I
....Preferred Stock Preferred Stock,
Downgraded to Baa2 from Baa1
....Preferred Stock Shelf, Downgraded
to (P)Baa2 from (P)Baa1
..Issuer: National City Preferred Capital Trust II
....Preferred Stock Shelf, Downgraded
to (P)Baa2 from (P)Baa1
..Issuer: National City Preferred Capital Trust III
....Preferred Stock Shelf, Downgraded
to (P)Baa2 from (P)Baa1
..Issuer: PFGI Capital Corporation
....Preferred Stock Preferred Stock,
Downgraded to Baa2 from Baa1
..Issuer: Provident Bank
....Subordinate Regular Bond/Debenture,
Downgraded to A3 from A2
..Issuer: Provident Capital Trust I
....Preferred Stock Preferred Stock,
Downgraded to Baa1 from A3
..Issuer: Provident Capital Trust III
....Preferred Stock Shelf, Downgraded
to (P)Baa1 from (P)A3
..Issuer: Provident Financial Group, Inc.
....Senior Unsecured Regular Bond/Debenture,
Downgraded to A3 from A2
The following rating was downgraded, but is not on review for possible
downgrade:
..Issuer: National City Credit Corporation
....Commercial Paper, Downgraded to
P-2 from P-1
The following ratings are on review for possible downgrade:
..Issuer: National City Bank
....OSO Rating, Placed on Review for
Possible Downgrade, currently P-1
....Deposit Rating, Placed on Review
for Possible Downgrade, currently P-1
....Multiple Seniority Bank Note Program,
Placed on Review for Possible Downgrade, currently P-1
National City, headquartered in Cleveland, Ohio, reported
assets of $150 billion at year-end 2007.
New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Allen H. Tischler
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653