National City is one of the regionals under the greatest pressure and scrutiny. This Friday afternoon announcement has to make deposit- and shareholders alike very nervous.
National City Corp., Ohio’s largest bank, said the U.S. Securities and Exchange Commission started an informal probe into the company’s lending and the sale of its subprime home unit to Merrill Lynch & Co.
The bank was asked in June to provide the regulator with “certain documents concerning its loan underwriting experience, dividends, bank regulatory matters and the sale of First Franklin Financial Corp.,” Cleveland-based National City said in a filing today. First Franklin was sold to Merrill Lynch in December 2006 for $1.3 billion.
“We are voluntarily cooperating with the SEC,” said spokeswoman Kristen Baird Adams in an interview. “Given the volatility in the market and certainly in our stock price in particular, the action is not surprising.”
The notice adds another layer of scrutiny for National City, which said in June said it had signed an accord with the Office of the Comptroller of Currency tied to capital, risk and liquidity management. The bank wouldn’t elaborate. National City has been the worst-performing stock tracked by the 24-company KBW Bank Index this year, losing almost 70 percent.