PNC Buys National City

PNC will pay $5.2 billion for National City, a bank beleaguered by the poor performance of its mortgage portfolio.

“The acquisition will allow PNC to cover some very attractive markets and enhance our already strong presence in Pittsburgh, Cincinnati and Louisville,” said James Rorh, Chairman and CEO of PNC Bank, on a conference call this morning. “I look forward to growing in Columbus, Indianapolis, St. Louis and Chicago -- all dynamic metropolitan areas with increasing populations.”

victoria fierson

During a conference call Friday, PNC Chief Executive James Rohr told analysts the bank expects to record $19.9 billion in write-downs on National City loans. PNC may also consider issuing $1 billion in common equity 'in the foreseeable future,' but only after speaking with top shareholders.

National City posted a $729 million quarterly loss earlier this week. Its chief executive, Peter Raskind, told Reuters on Tuesday that the economic environment 'probably gets worse before it gets better.'

Raskind will join the combined bank's board, along with one other National City director.

PNC's Rohr said Treasury's offer to inject capital made the deal for National City attractive. With the new funds, the combined company's Tier 1 capital ratio would be a healthy 10 percent.

PNC faced competition for National City, Rohr said, adding that the bank had scrutinized a deal with National City 'for quite some time,' he said. He declined to say whether Treasury forced PNC to acquire its weaker rival.

Typically bank mergers trigger antitrust provisions that require branch and business sales, but Rohr said concentration issues exist in less than 3 percent of the combined deposit base. Currently, the two banks combined have $180 billion in deposits.

Citigroup, JPMorgan Chase & Co, and Sandler O'Neill advised PNC, while Goldman Sachs advised National City.

-forbes

This seems like a very good deal for PNC. They are taking advantage of the Bailout Credit (&b) and reinvesting that money into the purchase of a competitor.

Unless they are just dead wrong on the NCC balance sheet, this ought to work out well.

One of the largest banks in Indiana is planning to cut 4,000 positions, or 14 percent of its workforce, over the next three years. Cleveland-based National City Corp. (NYSE: NCC) has not stated how many jobs will be eliminated in Indiana. The company says it expects the move to result in run-rate annual savings of between $500 million and $600 million by 2011. National City is reporting a third quarter net loss of $729 million.

-gerry dick

It Looks like the fix was in , but they missed on the price.

Option Activity Alert on the 21st.

With the stock trading near the 3 level, it's hard to blame option traders for preferring call options on NCC. Yesterday, these bullish bets were the option of choice among investors on the International Securities Exchange (ISE) and the Chicago Board Options Exchange (CBOE).

First up, traders on the ISE bought to open 1,848 calls and 103 puts on NCC, for a single-day call/put ratio of 17.94. Meanwhile, option players on the CBOE bought to open 5,365 calls and 1,637 puts, for a slightly more reasonable call/put ratio of 3.28.

-elizabeth harrow

The problems have appeared in a range of industries. The aviation giant Boeing saw profits fall 38 percent last quarter. Merck, the pharmaceutical company, posted a 28 percent drop in net income and will cut jobs. The North Carolina-based bank Wachovia, which was recently acquired by Wells Fargo, suffered a $23.7 billion net loss.
At 1:45 p.m., the broad Standard & Poor’s 500-stock index was down more than 4.5 percent. The Nasdaq composite index was off about 3 percent, despite gains in shares of Apple and Yahoo. The Dow, after falling more than 200 points on Tuesday, was off about 380 points to 8,649, a decline of 4.3 percent, with 29 of the 30 components of the index in retreat. Only McDonald’s showed a gain.

In Tokyo, the benchmark Nikkei 225 stock average plunged 6.8 percent after three days of gains as the yen surged. NEC Electronics plummeted about 20 percent. The electronics company shocked investors by slashing its annual operating profit forecast by 90 percent to 1 billion yen, or $10 million, citing weak demand.
In Sydney, the S&P/ASX 200 closed 3.4 percent lower. The Hang Seng index in Hong Kong closed more than 5 percent lower, as Citic Pacific fell 24 percent. The company this week predicted a trading loss of up to $2 billion caused by what it said were unauthorized bets on foreign exchange markets.

-NYT

Courts: Echostar Pays Tivo 104.6 Million

LOS ANGELES (Reuters) - TiVo Inc said on Thursday it has received the $104.6 million in damages from EchoStar Corp that it won this week when the U.S. Supreme Court denied an appeal of a patent infringement case.

A ruling is still pending from U.S. District Judge David Folsom in Texas on whether EchoStar owes TiVo more damages for allegedly failing to turn off its DVRs, as required in an injunction. TiVo said it expects further damages.

-Washington Post

Buyout Plan Proposed Like Buffet Investment

Unlike in the case of American International Group, which had to surrender an 80 percent stake to the government in order to secure a massive loan, Treasury officials are considering taking non-controlling equity stakes in banks that accept the cash infusions, likely in the range of 10 or 15 percent, the sources said. Shareholders would lose less of their stake in the company under such a plan.

The new capital injection program could look like Warren Buffett's recent investments in General Electric and Goldman Sachs, according to an industry analyst.

Buffett invested several billion dollars in each company to help them weather economic difficulties. In return, he received shares of preferred stock. Those shares carry a high yield -- the equivalent of a premium on an insurance policy -- but they also allow the companies to buy out Buffett once they're back on solid ground.

-Washington Post

More Carnage

U.S. Considers Cash Injections Into Banks

The proposal resembles one announced on Wednesday in Britain. Under that plan, the British government would offer banks like the Royal Bank of Scotland, Barclays and HSBC Holdings up to $87 billion to shore up their capital in exchange for preference shares. It also would provide a guarantee of about $430 billion to help banks refinance debt.

Yet the world’s markets hardly seemed comforted. Credit markets on Wednesday remained almost as stalled as the day before. Stock prices, which had plunged in Europe and Asia before the announcement, continued to plummet afterward. And stock prices in the United States went on a roller-coaster ride, at the end of which the Dow Jones industrial average was down 189 points, or 2 percent.

-NYT

Air Delivery

Air Delivery - edit - hide				Mkt Cap
UPS	57.90	-1.29	(-2.18%)	58.37B
FDX	70.97	-3.69	(-4.94%)	22.09B
EXPD	28.82	-0.34	(-1.17%)	6.14B
HUBG	30.81	-0.22	(-0.71%)	1.16B
PACR	12.98	+0.35	(2.77%)	452.82M

Grocers

Grocers - edit - hide				Mkt Cap
CASY	26.39	-0.62	(-2.30%)	1.34B
DEG	53.76	-1.43	(-2.59%)	5.34B
KR	24.88	-0.88	(-3.42%)	16.23B
SWY	23.68	+0.83	(3.63%)	10.31B
WFMI	17.34	+0.30	(1.76%)	2.43B

Metals

Metals - edit - hide				Mkt Cap
AA	14.71	-2.00	(-11.97%)	11.97B
ACH	11.65	-0.54	(-4.43%)	6.30B
CENX	17.38	-0.52	(-2.91%)	852.46M
KALU	33.76	-0.25	(-0.74%)	696.05M

Gold

GOLD - edit - hide				Mkt Cap
GLD	89.42	+2.15	(2.46%)	19.23B
ABX	35.71	+5.21	(17.08%)	31.13B
GG	31.02	+5.11	(19.72%)	22.10B
NEM	37.33	+4.82	(14.83%)	16.95B
KGC	16.20	+2.58	(18.94%)	9.97B
AUY	7.51	+1.19	(18.83%)	5.25B
AU	19.71	+3.22	(19.53%)	5.56B
BVN	22.38	+2.44	(12.24%)	5.69B

Oil

OIL - edit - hide				Mkt Cap
XOM	77.00	+0.93	(1.22%)	399.94B
PTR	82.75	-1.91	(-2.26%)	151.45B
BP	44.70	+0.28	(0.63%)	139.50B
CVX	73.10	-0.25	(-0.34%)	150.18B

Airlines

Airlines - edit - hide				Mkt Cap
UAUA	5.40	+0.38	(7.57%)	683.61M
DAL	5.64	-0.07	(-1.23%)	1.71B
CAL	10.95	+0.11	(1.01%)	1.20B
LCC	4.13	-0.98	(-19.18%)	459.06M
TAM	12.82	-0.49	(-3.68%)	1.93B
BAIRY	20.50	-1.16	(-5.36%)	2.36B

Bank Stocks

Banks - edit - hide				Mkt Cap
UBS	16.50	-0.06	(-0.36%)	46.72B
C	14.40	-0.75	(-4.95%)	78.41B
KEY	9.00	-1.61	(-15.17%)	4.45B
CIT	6.47	-0.53	(-7.57%)	1.85B
MER	17.98	-0.02	(-0.11%)	27.49B
JPM	39.30	-0.02	(-0.05%)	135.08B
LEHMQ	0.112	-0.028	(-19.64%)	77.51M
HBC	76.01	-2.28	(-2.91%)	183.21B

Global Rate Cut

"Wall Street stocks on Wednesday extended their worst five-day run of losses since 1987 after the co-ordinated global interest rate cut failed to calm nerves during a highly volatile session. "
-FT

Bank of America off another 7.7 per cent to $21.95 after the group priced 455m shares at $22

Stock futures jumped immediately after global central banks announced the cuts. “At last, a co-ordinated show of force,” said Ian Shepherdson of High Frequency Economics. “The move is to be applauded but there is more to come . ”

VIX up 7.3 per cent to 57.58, the highest level since the credit crisis began.

The SEC confirmed that its short ban imposed last month would be lifted last night, as planned.

Good news at least for now.

Legg Mason fell 13 per cent on Wednesday to $25.25, after Moody’s cut the debt rating on the money manager.

American Express was among the biggest winners earlier in the session after Sanford C. Bernstein initiated coverage on the stock with a “market perform’’ rating and said the credit card group stands to increase market share. It later reversed the gains to stand 4 per cent lower at $27.12.

Morgan Stanley – which sank as much as 39.9 per cent in the previous session on speculation that Mitsubishi UFJ Financial Group’s planned $9bn investment might not materialise – rose 4.8 per cent to $16.80. Morgan Stanley and Mitsubishi reiterated that the deal would go ahead.

Bank of New York Mellon climbed 7.9 per cent to $24.45 after agreeing to buy JPMorgan Trust Bank in Japan.

On the morning that Gordon Brown, UK prime minister, said he was prepared to do “whatever it takes” to ensure the stability of the banking system – raising the spectre of a soaring public debt – sterling held surprisingly steady.

As markets closed, after an assortment of central banks had combined for the first ever truly global rate cut, it was only fractionally down against the dollar and the euro.

Because of the global rate cut, no change in price. Will that mitigate inflation across the globe?

Could it be good news that this is a global problem?

In Japan, the Nikkei 225 fell 9.4 percent, the largest single-day loss since the Black Monday market crash in October 1987, and now is down more than 40 percent over the past year. Markets in Hong Kong dropped more than 8 percent, and those in Singapore and South Korea were down 6 percent and 5 percent respectively.

-Washington Post

In Europe, officials in London unveiled an $87 billion plan to infuse capital into the country's major banks, partially nationalizing one of the world's major financial centers. But major European indexes still plummeted in morning trading, falling anywhere from 3.5 percent to almost 6 percent. The losses follow a 5 percent drop in the Dow Jones industrial average on Tuesday, and pessimistic comments from Federal Reserve chairman Ben S. Bernanke about the state of the economy.

-Washington Post

Oil dropped below $90 a barrel as the raw materials sector was battered by the ongoing storm sweeping global financial markets.

The price of copper capped a torrid third quarter on Friday with the second largest weekly fall for the benchmark London Metal Exchange three-month contract, 11.8 per cent to $5,977.5 a tonne.

-FT