Sunday, November 9, 2008

Something stinks in Denmark & I smelled it in Italy

I’ve just returned from several weeks in Italy. We had a great time in a beautiful country. I would have had a better trip had not NCC sold itself to PNC for a pittance.

The company has never issued a press release that detailed their reasoning. One newspaper article alluded to finding out that the Treasury probably wouldn’t put capital into NCC and the FDIC wouldn’t guarantee their debt. When word got out they would be at a disadvantage to their peers. OK, but why sell for peanuts? They had close to $1B of Visa stock and an asset management subsidiary worth several hundreds of millions. They touted the fact that they had the highest tier 1 capital of all big banks and told analysts that they had no need to raise capital or sell the company. New tax rulings would have made their bad loans more valuable.

The loans had to be worse than presented and that stinks. But that’s the way it goes. At least it is a stock deal. That will likely push the holding period into the capital gains/loss timeframe and, most importantly, if PNC did get a sweetheart deal, allow NCC shareholders to participate in PNC’s benefit. This assumes that the market ever recognizes such and moves PNC up. It will be the 5th largest bank and not pay any taxes for the next 5 years.

My NCC position is underwater and I’m going to ride PNC for awhile.
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