Monday, July 21, 2008

NCC still looks good

The market hates NCC. It seems to be regarded more poorly than WAMU and Wachovia! It has bounced back nicely since its low, but is still universally feared and loathed by investors. The analyst buy ratings haven’t translated into a rising share price and over 20% of the shares are still sold short.
My work shows NCC having more than enough capital and reserves to charge off their losses and still be adequately capitalized. The bank has about 24B of capital and high risk portfolios of approximately the same amount. Of course, a bank doesn’t lose on every loan and they don’t lose 100% on each loss. Collateral backstops most loans. Myassumptions result in about 5B of potential losses, an amount about twice what the company says. If you doubled my estimates, NCC would still survive and be adequately capitalized. Regulators are not going to close this bank and a “run” should not occur either.
If anyone cares, I can email my work. It’s too much to retype and for some reason, I can’t cut and paste the spreadsheet.
The numbers come out Thursday and I hope the conference call is positive.

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