National City defends plan for capital infusion
Shareholders are frustrated that National City’s stock has lost 80 percent of its value.
CLEVELAND (AP) — Some National City Corp.’s shareholders vented frustration and concerns, while the regional bank’s top executive on Tuesday defended the $7 billion capital infusion that will keep the bank afloat.
National City’s chairman and chief executive Peter Raskind said the deal was necessary to bolster a balance sheet hurt by its exposure to high-risk mortgages. Shareholders will vote on the new arrangement June 23.
Raskind told about 150 stockholders at the company’s annual shareholders meeting that the private equity investment, led by $985 million from New York-based Corsair Capital, will help stabilize the bank’s debt rating as it works on its core retail and commercial banking businesses.
But the deal dilutes the value of the existing shares. And Raskind, in answer to a shareholder’s question, wouldn’t speculate when the dividend — which was cut from 41 cents to 21 in January and then to a penny as part of the infusion — might improve.
He also said National City will need time to recover because it remains stuck with bad loans tied to high-risk mortgages.
“Frankly its not much better today than in early March or winter. We have loans with depressed market values held in portfolio,” Raskind said. “Given the losses the last three quarters, the dividend reduction and capital raise were the only reasonable thing we could do.”
About 70 shareholders packed into a meeting room inside National City’s headquarters. An estimated 80 more participated from a neighboring room set up with a monitor.
One questioner drew cheers from a few other shareholders when he asked why shareholders should feel confident if National City’s board of directors and top management remain in place.
Shareholder Donald Sutter, 51, said listening to Raskind didn’t make him feel any better. He said his personal net worth has suffered while National City stock has lost about 80 percent of its value during the past year.
“I still think there is another shoe that’s going to drop here,” Sutter said. “And I think the stock will be taking another hit.”
Tom Gray, 62, a shareholder and a retired National City executive, praised Raskind’s fortitude.
“He was standing there taking the heat,” Gray said. “I’m rooting for National City, but I’m not happy. We got into risky loans. It’s going to be a tough road to go for a few years.”
National City shares fell 6 cents to $6.43 in trading Tuesday. The shares have traded in a one-year range of $5.87 to $37.34.