5:37PM National City: Fitch has downgraded NCC and its subsidiary, National City Bank's, long and short-term Issuer Default Ratings (NCC) 3.51 +0.37 : Fitch reported that NCC has been battling asset quality issues in its mortgage and home equity portfolios for over a year. Fitch notes that during that time the co raised $7.0 bln in new equity capital and improved its liquidity profile and processes. The near future is unlikely to offer the co any relief and may very well result in additional asset quality problems as the economy weakens, says Fitch Ratings. With market pressures making access to new forms of funding quite difficult, NCC will need continued focus on maintaining its strong liquidity. The recent passage of the Emergency Economic Stabilization Act could potentially provide the company with some relief. Fitch has downgraded NCC and its subsidiary, National City Bank's (NCB's), long and short-term Issuer Default Ratings (IDR). NCC long-term IDR has been lowered to 'BBB+' from 'A' while NCB's long-term IDR has been lowered one-notch to 'A-' from 'A'. The bank and the holding co's Individual rating has been lowered to 'C' from 'B' and the short-term IDR was lowered to 'F2' from 'F1'. Additionally, Fitch has placed all ratings on Negative Rating Watch. NCC's liquidating portfolio, comprised largely of mortgage and home equity loans, remains its most problematic and represents ~18% of total loans. While ultimately Fitch views this portfolio as manageable if worked out over a period of years, the portfolio has caused a sizeable uptick in NPAs and NCOs. The now more evident slow-down in the U.S. economy may add to problem assets and would clearly hinder the company's return to profitability and earnings are expected to remain pressured. The co has a relatively higher level of problem assets for a co in the 'A-' rating category. The Negative Watch reflects concern that further deterioration in the overall economy could result in additional asset quality problems. Fitch notes that the parent has minimal near term maturities and several years worth of liquidity to meet all obligations without consideration of any potential dividends from its banks. Since earlier this year, the co began stockpiling both liquidity and capital, which now provides the firm with a meaningful cushion to withstand further write-downs of problem assets, even to liquidation values.