Mortgage Losses Sink Bank’s Earnings
A “difficult environment” for mortgage operations took National City earnings below analysts’ expectations for the first quarter, the Cleveland, Ohio-based banking institution reported Monday.
For the period ended March 31, the home mortgage company’s profit plummeted 30.5 percent to $319 million from $459 million in the first quarter of last year, according to the St. Louis Business Journal.
The company’s total revenue climbed a little more than half a percent to $2.82 billion from $2.8 billion in the first quarter of 2006. Total revenue includes the bank’s total interest income and non-interest income.
National City’s non-interest income was $621 million in the first quarter of 2007, down 5 percent from $656 million in the same period of 2006. Total interest income was $2.2 billion, compared with $2.15 billion in Q1 of 2006.
National City said in a news release that the margin decline was directly related to its “originate and sell” strategy for non-conforming mortgage loans, home equity line of credit revenues and regular home loans.
A claims dispute with a third-party mortgage insurance provider added about $20 million to the provision for credit losses.
David Daberko, chairman and chief executive, said the retail, corporate and asset management operations performed well.
“Our mortgage business continues to operate in a difficult environment, but we have less exposure to the mortgage loan sector than in prior years,” Daberko said.
“Overall, we expect each successive quarter from here to show improved earnings.”
In December, National City bought Fort Pierce, Fla.-based Harbor Florida Bankshares Inc. for more than $1 billion.
During the same month, the company sold its San Jose, Calif.-based First Franklin loan origination and servicing platform for $1.3 billion to Merrill Lynch & Co.
Then National City completed its acquisition of Fidelity Bankshares Inc. on January 5. Fidelity operates 52 branches along Florida’s southeast coast.
As of March 31, National City’s total assets were $138.6 billion, down more than 1 percent from $140.2 billion as of March 31, 2006.
SOURCE: St. Louis Business Journal