National City Corp. and Fifth Third Bancorp delivered more bad news from regional banks as they reported third-quarter losses amid large credit-loss provisions and worsening credit quality.
Still, the Ohio banks managed to improve their results from the second quarter, when both companies had even wider losses. Nonetheless, National City announced plans to cut 14% of its work force, or 4,000 jobs, as it moves to cut $500 million to $600 million in costs by 2011.
The results come as investors remain worried about how the regional banks will make it through the financial crisis when their larger counterparts, considered better equipped to withstand troubles due to their expansiveness, have fallen victim to the credit crisis.
National City 3Q Net Loss Widens from Year Earlier
National City posts its fifth-straight quarter of red ink amid mortgage-related losses for the embattled bank, which has formed a $21 billion "exit portfolio" to manage loans remaining from exited business and discontinued products separately from its core retail banking.
Its third-quarter net loss was $729 million, or $5.86 a share, compared with a prior-year net loss of $19 million, or 3 cents a share. Revenue - tax-equivalent net interest income and noninterest income - fell 18% to $1.41 billion.
Analysts polled by Thomson Reuters were expecting a loss of 31 cents a share on $1.72 billion in revenue.
The company, which has more than 1,400 branches in nine states, recorded $1.2 billion in loan-loss provisions, down 25% from the second quarter but more than triple the prior-year amount.
Net charge-offs — loans the bank doesn't think are collectible — jumped to 2.67% of total loans from 0.54% last year and 2.61% in the second quarter. Nonperforming loans — those near default — climbed to 3.19% from 1.08% and 2.74%, respectively.
Net interest margin, the difference between interest earned and interest paid out to depositors, fell to 2.99% from 3.43% a year earlier.
The bank's Tier 1 capital ratio rose to 10.98% from 6.78% a year ago and 11.06% in the second quarter.
National City, for years a conservative commercial lender until it made a nationwide push into subprime and home-equity loans, is still considering whether it will seek to participate in the U.S. government's program to provide new capital to the nation's major banks.
Analysts and company executive have said National City has more than enough capital to handle the mortgages on its books, yet rumors persist that it may sell itself. The fact that the bank has been hobbled by loans has led investors to draw connections between it and other banks that have recently failed or agreed to sales to larger companies.
Fifth Third Bancorp Swings to 3Q Loss
The Cincinnati bank — a Midwestern stalwart that, like many rivals, expanded into hot markets such as Florida during the housing boom and is now paying for it — swung to a net loss of $56 million, or 14 cents a share, compared with prior-year net income of $325 million, or 61 cents a share, a year earlier. The latest results included a net 10 cents in charges.
Revenue climbed 24% to $1.79 billion.
Analysts polled by Thomson Reuters were expecting earnings of 18 cents a share on $1.66 billion in revenue.
The bank's loan-loss provision soared to $941 million, up nearly sevenfold from a year earlier 31% from the second quarter.
Net charge-offs — loans the bank thinks are no longer collectible — rose to 2.17% of average loans and leases excluding those held for sale from 0.60% in the prior year and 1.66% in the prior quarter. Nonperforming loans, those in danger of default, increased to 3.3% of total assets from 0.92% and 2.57%, respectively.
Net interest margin, the difference between interest earned and interest paid out to depositors, fell to 4.24% from 3.34% last year and 3.04% in the second quarter.
National City closed Monday at $2.92, while Fifth Third ended at $12.23. Neither was active in premarket trading.