updated 4/2/2008 11:17:49 AM ET 2008-04-02T15:17:49

A day after National City Corp. said it was considering strategic options a report said the struggling bank, hurt by the worsening mortgage and housing market, could sell itself to another Cleveland-based bank.

The Wall Street Journal, citing people familiar with the matter, reported Wednesday that National City is considering an outright sale to KeyCorp. Analysts said a KeyCorp buyout might lead to large cost reductions.

National City said Tuesday that New York investment bank Goldman Sachs has been hired to look into strategic alternatives. National City has not confirmed that it is seeking a buyer and did not elaborate on what alternatives are being considered.

National City spokeswoman Kristen Baird Adams on Wednesday declined to comment on the report. The bank said Tuesday that it will not talk publicly until its board makes a decision about what National City will do.

KeyCorp spokeswoman Lynne Woodman also declined to comment.

Analysts say a sale is a possibility. Other options include selling part of its business, raising money or reducing or eliminating its dividend, analysts said.

National City is expected to announce its dividend next Tuesday. It cut its dividend almost by half in January, and closed its wholesale mortgage division. It has slashed about 3,400 jobs in recent months.

The company's stock has plummeted in the past year amid the problems, closing at $9.99 Tuesday, 74 percent off its high of $38.32 last April.

Lehman Brothers analyst Jason Goldberg said other potential buyers include Wells Fargo & Co., JPMorgan Chase & Co. and PNC Financial Services Group Inc. He noted that the company has sold a few divisions in recent years, including its National Processing unit.

Gerard Cassidy of RBC said an outright sale is unlikely because of National City's high exposure to risky loans. But a sale of some assets is likely, he wrote, and the company could try to find a way to get more money from a $1 billion stake in Visa Inc., although it cannot sell those shares outright.

Cassidy said Tuesday's announcement reflects how quickly the company's credit quality has fallen, and expectations that it will get worse.

National City operates about 1,400 bank branches spread mostly across Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania and Wisconsin.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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