Moody's may upgrade National City, give negative outlook to PNC

Moody's Investors Service said it changed the outlook on PNC Financial Services Group, Inc. (A1 senior debt) and its subsidiaries to negative from stable.

The agency also placed the ratings of National City Corp. and its subsidiaries on review for possible upgrade, including its A3 senior unsecured convertible and regular bonds, Baa1 subordinated bonds, Baa2 preferred stock and Prime-2 short-term rating.

Also on review for upgrade are the A2 issuer rating and senior unsecured bonds and A3 subordinated bonds of National City Bank; the A3 subordinated bonds of National City Bank of Kentucky, National City Bank of Pennsylvania, National City Bank, Indiana and Provident Bank; the senior unsecured bonds of National City Bank, Indiana and Provident Financial Group, Inc., rated A2 and A3 respectively; the Baa1 preferreds of National City Capital Trust I-IV, Provident Capital Trust I and First of America Capital Trust I; the Baa2 preferreds of National City Preferred Capital Trust I and PFGI Capital Corp.; and the Prime-2 commercial paper of National City Credit Corp.

The rating action follows PNC's announcement that it has agreed to acquire 100% of National City in an all-stock transaction.

Moody's said the negative outlook on PNC reflects the integration challenges of the acquisition as well as the incremental credit risk associated with National City's large portfolio of troubled real estate assets, both residential and commercial.

In placing National City's ratings under review for possible upgrade, the agency said the company's creditors are expected to benefit from becoming part of an entity that has demonstrated comparatively stable performance during an historically challenging credit cycle.

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