BANKING National City's image shifts from seller to buyer
National City positions itself as a stronger competitor in the Midwest.
CLEVELAND (AP) -- Until it went on a shopping spree over the last seven months, National City Corp. was on Wall Street analysts' list of banks that could be sold.
Analysts agree that nearly any bank could be sold at any time in an environment where banks are merging so fast customers can't keep up with the names.
But several say National City, which recently has bought three Midwest banks, is positioning itself as a stronger competitor that is less likely to be bought than other banks in the region, such as KeyCorp in Cleveland and PNC Bank in Pittsburgh.
David Daberko, National City's chairman and chief executive, isn't likely to wave a "For Sale" sign soon, said analyst Gerard Cassidy, managing director of bank equity research for RBC Capital Markets in Portland, Maine.
Buyers and sellers
Daberko, 58, repeats the oft-cited line: "Banks are sold, they're not bought."
Banks that are purchased "made up their mind" to be bought, Daberko said. "If you make the decision to sell, then it will happen, and it will happen very quickly."
Linda Varoli, senior analyst at Merger Insight in New York, said National City's growing empire would be attractive to a bank that wants a presence in the Midwest.
"From their past actions, National City seems to be more inclined to be a buyer than a seller," Varoli said.
After a flurry of purchases in the 1990s, National City made no acquisitions for nearly six years, but recently announced three: Allegiant Bancorp Inc. of St. Louis, which has 37 branches; Provident Financial Group, which has 65 branches, most in the Cincinnati area; and Wayne Bancorp Inc. of Wooster with 26 branches.
"These acquisitions are textbook plays," said Graeme Deans, vice president of the consulting firm A.T. Kearney Inc. "If you don't want to be bought, you've got to maximize your shareholder value, and I think [Daberko] has done a very good job of that."
Midwest presence
Banking analyst Jason Goldberg of Lehman Brothers in New York said the Allegiant move gets National City into St. Louis, while the Provident purchase fills its Cincinnati hole and propels National City to the largest bank in Ohio.
Goldberg noted that National City last year posted $2.1 billion in earnings, or $3.43 per share, up 50 percent from 2002. Earnings have been up four straight years.
While the mortgage activity on which National City depends is slowing, Goldberg said National City has improved its retail business and management team and is positioning itself well.
After the recent purchases close, National City will have about 1,200 branches, primarily in seven states. Daberko wants to have 1,500 to 1,800 branches, all in the Midwest. He said he has no interest in expanding to the South or West.
Whether National City is coveted by other banks or not, the list of possible suitors is getting smaller, Varoli said.
"Once you get to a certain size, there are only so many companies that can buy you," she said.
A 1994 federal law prohibits any bank deal that would give the merged company control of more than 10 percent of deposits nationally, ruling out Bank of America, Wells Fargo and the new J.P. Morgan Chase/Bank One.
A couple overseas banks, HSBC Holdings and Royal Bank of Scotland, would be more likely buyers of Midwest banks, Varoli said.