David A. Daberko, chairman and chief executive of National City Corp., acknowledged Wednesday that his $85 billion-asset banking company has made some missteps, but said the stock market has strongly overreacted. And he asserted that the Cleveland-based company will continue to produce double-digit earnings growth.

National City's stock was clobbered after it said on Nov. 16 that it would miss analysts' fourth-quarter earnings estimates. The consensus estimate had been 59 cents a share, while the company said it would be 2 cents to 5 cents lower. Since then, the value of National City shares has plummeted more than 23%, compared with a 14.4% decline in American Banker's index of the 50 largest banks.

The selloff gives the company one of the lowest price-to-earnings ratios among the 24 banks in the Keefe, Bruyette & Woods index. National City's price/earnings ratio based on projected 2000 earnings stood at 10.5 on Wednesday, far below the group's average multiple of 14.21.

"It is astounding, Mr. Daberko said. "We said our growth would be 2% to 3% less than it had been, and the stock was hammered so drastically that it has become terribly undervalued."

National City "has had an unbroken record of rising earnings over eight years, and for that we have the honor of having the lowest P/E," Mr. Daberko said in an interview Wednesday.

He acknowledged analysts' contention that the heart of the problem was funding costs. Low-cost core deposits fell during the third quarter, analysts say, which increases the company's funding costs. One way to address this is through securitization, Mr. Daberko said, adding that the company will increase the amount of loans it securitizes. It will also increase its revenues through initiatives in small-business and specialty corporate lending, he said.

The failure of low-cost deposits to grow as had been expected prompted the company to seek new sources of revenue. "When deposits do not grow you start to originate and service loans rather than hold them," Mr. Daberko said. "There is a valuable role in originating and servicing loans."

Mr. Daberko said part of the shortfall also reflected a loss of revenue from several businesses that were sold this year, including remittance processing units.

The National City chairman also blamed the company's earnings disappointment on a changing market. "The banking industry had been in a wonderful environment," he said. Credit costs were coming down, inflation was low, and banks were able to attain more rapid earnings growth. "Now, with the credit cycle starting to deteriorate, earnings growth will slow down just a little."

Some analysts agree that National City's price/earnings ratio is far lower than what it deserves, yet say that the company's earnings growth is of concern.

"National City is a good bank, the stock definitely has been oversold, and it doesn't warrant its current P/E," said Fred Cummings, an analyst at MacDonald & Co., a subsidiary of KeyCorp, National City's archrival, whose stock price also has come under severe pressure.

"Like most banks, National City's loan growth is outpacing wholesale funding and people are frustrated by that," Mr. Cummings said. "National City is a sound company and is profitable, but where will earnings growth come from?"

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