LAS VEGAS — After suffering punishing losses in the subprime mortgage market, National City Corp. is shifting its focus to payments.
"Our entire strategy is built around payments," Peter Raskind, National City's president and chief executive, said Monday during a keynote address at the Payments 2008 conference here.
He said the shift would help "rebuild our company," and that focusing on handling transactions will help the Cleveland banking company see where it stands with its customers.
"We want to be our customers' primary payments engine," he said. "When we are, we know we are their primary bank."
Such customers are less likely to leave and more likely to take out other accounts at Nat City and help it earn sustainable returns, Mr. Raskind said.
"We want broad relationships," he said, "and the way we know we are really their bank is when we are the payments provider."
National City, which invested heavily in the mortgage business, has lost more than two-thirds of its market value since last summer, when the extent of its problems in subprime loans in troubled markets such as Florida began to come to light.
In early April the $150 billion-asset National City said it was reviewing "a range of strategic alternatives," which set off speculation that it would be sold.
But by the end of the month it had raised $7 billion by selling stock at a discounted price to a new group of investors, and Mr. Raskind sounded optimistic his company would stay independent.
"We think we've resolved our foreseeable future with the capital raise," he said. "We believe the capital raise to be sufficient — more than sufficient."
Mr. Raskind said National City plans to rebuild itself around its retail and commercial banking and wealth management franchises, strengthening relationships with its customers by offering customized tiers and bundles of products.
Joseph T. McCartin, its chief information officer, has said the company has developed systems to offer customized, tiered services.
Mr. Raskind said it would pursue a strategy of "disciplined execution."
"We've still got work to do," he said. "We think we are making tangible progress."
In several markets where National City has grown by acquisition, it has many customers who have only a single account, which is something Mr. Raskind said he would try to change.
"This mortgage stuff will fade away, one way or another," he said. "The businesses that were troublesome, we're not in anymore. The self-liquidating portfolios will self-liquidate."
"Now we've got important work to do to rebuild the bank, to rebuild earnings," he said. "It's not going to be superfast, but we can see the road forward from here."
Gerard Cassidy, a managing director with Royal Bank of Canada's RBC Capital Markets, said Nat City faces an uphill climb. "When you think of payments companies, National City is not one of the banks that's on the top of the list," he said. "Payments is a business that requires economies of scale. It's not something you can just start to grow organically."
National City might consider buying its way into the space, but its financial troubles would likely make that difficult now, Mr. Cassidy said. "They are not in a position to buy."
A payments strategy might be a wise move after Nat City gets past its financial troubles, he said, "but to jump right in now and expect to be successful in the next six to 12 months is being way too optimistic."
