National City cuts jobs and mortgage products
by Gill Montia
Story link: National City cuts jobs and mortgage products
National City Corporation, the US bank with around £70.7 billion in assets under management, is reducing its range of mortgage products and will cease selling through brokers.
Mortgages already bought through brokers will be pooled into a new fund that will be managed by a team that has yet to be appointed.
A large amount of the bank’s mortgage lending has been to homeowners in states such as Ohio, Michigan and Florida, where the collapse of the US housing market has led to high repossession rates.
The actions planned could be described as drastic, as the bank now expects to sell between $15 and $20 billion worth of mortgages in 2008, compared with a pervious target of $35.7 billion.
National City’s stock has fallen 59% since its highest point in 2006 and the bank needs to take action to raise new capital and shore-up its balance sheet.
It estimates that around $700 million needs to be set aside to cover loan losses in the fourth quarter of 2007.
Around $500 million will be saved by a reduction in the quarterly dividend due in February, down to 21 cents per share, instead of the expected 41 cents.
Finally, staff cuts are being planned, with around 800 job losses anticipated and according to Peter Raskind, the bank’s chairman and chief executive, 2008 will be “quite challenging”.
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