National City Must Use $7 Billion Credit Wisely with Directors' Help

Apr.22.08 | About: National City (NCC)

As a measure to bring about its turnaround after the subprime mortgage debacle, the Ohio-based bank National City Corp (NYSE:NCC) could be on the verge of receiving $7 billion in capital funds from a private-equity firm.

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"The Cleveland-based regional bank was hammering out final terms of the transaction with a group of investors led by Corsair Capital LLC, a New York private-equity group. The parties were aiming to seal the deal by Monday," The Wall Street Journal reported in an article on Monday.

National City will appoint to its Board of Directors Corsair Capital Vice Chairman Richard E Thornburgh, the Bank said in a statement.

"This strategic raising of equity capital provides National City with the financial flexibility to continue investing in and growing our core businesses, which are delivering solid results, while addressing the asset quality challenges posed by the disruptions in the credit and housing markets," said National City CEO/President/Chairman Peter E Raskind.

Nevertheless, it is necessary for the Bank’s Directors to aggressively exercise their oversight role to ensure that its management team makes prudent decisions with regard to how the new capital is allocated.

NewsVisual created an IntellectSpace Knowledge Map that illustrates that the current members of the Bank’s Board of Directors have numerous connections to other corporations that suggest they are very experienced in financial governance issues.

For example, the Knowledge Map shows that NCC Director Jon E Barfield is the current President/Chairman of the Bartech Group Inc. But Mr Barfield is also a Director for BMC Software Inc (NASDAQ:BMC) and CMS Energy Corp. (NYSE:CMS).

Given this breadth of corporate experience, Mr Barfield should be able to provide National City’s Senior Executives with valuable advice on how the Bank could better manage its finances.

In addition, NCC Director Allen H Koranda was CEO/Chairman of MAF Bancorp Inc (MAFB) until National City acquired it 2007, which means that Mr. Koranda should be able to advise the Bank’s executive team, given his own experience in banking.