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By M.R. Kropko
Associated Press
POSTED: 11:43 a.m. EDT, Sep 08, 2008
CLEVELAND: Freezing credit lines often angers bank customers, so National City Corp.'s $200 incentive is an effort to persuade customers to agree to close their lines.
''What they are saying is that this will benefit the bank, and they are willing to compensate customers for that,'' said American Bankers Association senior economist Keith Leggett.
National City is trying to recover from steep losses in the home mortgage market. The $200 offer is to close equity lines that don't have a balance.
The Cleveland-based bank arranged a $7 billion capital infusion in April.
National City began prohibiting some customers from borrowing more on their equity lines last spring as home values fell and credit markets tightened. The bank targeted those with first and second mortgages that looked to be more than their updated lower home value.
The $200 is being offered to customers who have no balance on their home equity lines and were not drawing on their line, National City spokeswoman Kelly Wagner Amen said. The bank, which operates primarily in the Midwest and Florida, wouldn't disclose how many offers it's made, to which customers or where.
A bank must place money in reserve whenever a customer borrows from their credit line, and because of the uncertain credit market, banks are looking to preserve capital, Leggett said.
Leggett said he hasn't heard of any other bank, besides National City, that's offering customers an incentive to close a credit line.
''If it's very successful, you may find other banks will follow suit,'' he said. ''Not everybody will, but it's an interesting experiment.''
National City for the quarter ended June 30 reported a loss of $1.76 billion, or $2.45 per share, compared with a profit of $347 million, or 60 cents per share, in the second quarter of 2007. The results included a $1.1 billion goodwill impairment charge related to previous acquisitions. Goodwill typically reflects the value of an intangible asset.
CLEVELAND: Freezing credit lines often angers bank customers, so National City Corp.'s $200 incentive is an effort to persuade customers to agree to close their lines.
''What they are saying is that this will benefit the bank, and they are willing to compensate customers for that,'' said American Bankers Association senior economist Keith Leggett.
National City is trying to recover from steep losses in the home mortgage market. The $200 offer is to close equity lines that don't have a balance.
The Cleveland-based bank arranged a $7 billion capital infusion in April.
National City began prohibiting some customers from borrowing more on their equity lines last spring as home values fell and credit markets tightened. The bank targeted those with first and second mortgages that looked to be more than their updated lower home value.
The $200 is being offered to customers who have no balance on their home equity lines and were not drawing on their line, National City spokeswoman Kelly Wagner Amen said. The bank, which operates primarily in the Midwest and Florida, wouldn't disclose how many offers it's made, to which customers or where.
A bank must place money in reserve whenever a customer borrows from their credit line, and because of the uncertain credit market, banks are looking to preserve capital, Leggett said.
Leggett said he hasn't heard of any other bank, besides National City, that's offering customers an incentive to close a credit line.
''If it's very successful, you may find other banks will follow suit,'' he said. ''Not everybody will, but it's an interesting experiment.''
National City for the quarter ended June 30 reported a loss of $1.76 billion, or $2.45 per share, compared with a profit of $347 million, or 60 cents per share, in the second quarter of 2007. The results included a $1.1 billion goodwill impairment charge related to previous acquisitions. Goodwill typically reflects the value of an intangible asset.
Comments
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Akron, OH
Posted 11:56 AM, 09/08/2008
This actually sounds like a decent deal, considering the current market situation.
akron, oh
Posted 02:57 PM, 09/08/2008
Mine just sent me a letter. Saying They closed our line of credit that we had available.. Because the homes had all gone down in value in my area.... So this is better than countrywide.
Posted 07:46 AM, 09/11/2008
the browns just traded derek anderson to new england for a first and third round pick. how cool is that?
