National City Corp.'s shares may soon look attractive to investors seeking underpriced bank stocks with strong credit quality, analysts said.
In reiterating a "hold" rating on the Cleveland banking company's shares Tuesday, analyst Jennifer A. Thompson of Putnam Lovell Securities Inc. said the stock "showed signs of stabilization in the second quarter" and that she sees upward momentum "based on potential improvements in short-term fundamental outlook." Ms. Thompson said her lukewarm rating reflects National City's lack of diversification, which could restrain its long-term earnings. "The business model is still lagging," she said. Her report also said that the banking company is struggling with margin pressure. But she called its credit quality a "bright spot" and said that as investors seek shares with "limited downside risks" National City could offer an investment opportunity.