National City Corp. swung to a second-quarter loss as credit losses continued to surge. The company, which sees lower credit-loss provisions in the second half of the year, said it is the best-capitalized bank among its peer group.
The Ohio bank posted a net loss of $1.76 billion, or $2.45 a share, compared with year-ago net income of $347 million, or 60 cents a share. The latest results included a $1.1 billion writedown related to previous acquisitions.
The mean estimate of analysts polled by Thomson Reuters was for a per-share loss of 26 cents.
National City boosted its provision for loan losses to $1.59 billion from $145 million a year ago and $1.39 billion in the first quarter.
Net charge-offs loans the company doesn't think are collectible soared to 2.61% of total loans from 0.39% a year ago and 1.88% in the first quarter. Nonperforming loans those near default rose to 2.74% from 0.85% and 2.37%, respectively.
Ohio's biggest bank, which already suffered significantly from the credit crisis amid rising bad loans, had been effectively put on probation with regulators. But since then, it went through a $7 billion capital raise from outside investors. Existing shareholders weren't happy to see their holdings diluted, but the move was expected to help stabilize National City's capital base, hopefully allowing it to weather any further bad-loan exposure.
"With the completion of our $7 billion capital raise, National City is by far the best capitalized group among its peer group and is the best capitalized of all major U.S. banks," said Chairman and Chief Executive Peter Raskind.
Earlier this month, National City said it was "experiencing no unusual depositor or creditor activity" in response to fears that customers might be pulling cash out off the bank.
Last month, National City indicated it was off to a good start, saying that since the capital raising, it has had the highest Tier 1 capital ratio among large banks in the U.S., with debt ratings it called "solidly investment-grade and stable." underpinning the measure. The figure is a core measure of a bank's financial strength and consists primarily of shareholders' equity but may also include retained earnings. The higher the Tier 1 ratio, the safer the bank.
National City posted a Tier 1 ration of 11.08% in the most recent quarter, up from 6.56% a year ago and 6.67% in the first quarter. In comparison, Wachovia ended the second quarter with a ratio of 8%.
National City shares closed Wednesday at $4.71 and there was no premarket trading.