Third-quarter profits at National City Corp. were up 15 percent as the Cleveland-based bank continued to reduce its subprime mortgage portfolio in order to concentrate on consumer and small-business banking.
National City reported net income of $551 million, or 90 cents per share, compared with $478 million in the same quarter last year.
Although income from lending was down 5 percent to $1.15 billion, fee income was up 22 percent to $916 million.
National City said it expects a $1.3 billion sale of its First Franklin Financial Corp. subprime lending unit to Merrill Lynch & Co. to close by the end of the year. In the mean time, National City has sold about $6 billion in loans originated by First Franklin.
Balances of broker-originated home equity and non-prime mortgage loans were down 21 percent from the same quarter a year ago, and average portfolio loans stood at $97 billion in the third quarter, down from $108 billion last year.
Despite that, net charge-offs were up 41 percent from the same quarter last year, to $117 million. The increase in charge-offs was attributed to $10 million in fraud-related mortgage loan losses and a $14 million allowance for losses on nonconforming mortgages the bank plans to sell.
National City is also moving forward with a $1.1 billion acquisition of Harbor Florida Bancshares Inc., which operates 42 Harbor Federal Savings Bank branches on Florida’s east coast. That acquisition is expected to close in the fourth quarter. Another agreement to acquire Fidelity Bankshares and its 52 branches in east Florida for $1 billion is expected to close in the first quarter of 2007.