WaMu's Gone, but Trouble Spots Remain

"While National City has outsized problem loans on its balance sheet (its liquidating portfolio is 17% of loans), its capital level is far greater than peers," Fox-Pitt analyst Andrew Marquardt wrote in a research note. In addition, it "had been more aggressive than peers in writing down" troubled assets. The bank's Tier-1 ratio was 11% at the end of the second quarter.

Friedman Billings Ramsey also upgraded the firm to a buy-equivalent rating for similar reasons.

After hosting several investor events with National City's management, Marquardt says "the message was clear that it raised more than enough capital to deal with problem credits (and should have excess capital coming out of this cycle), it is prudently maintaining excess liquidity given the uncertain environment, is focus on improving credit quality and focused on its core businesses."

In contrast, Wachovia doesn't "have the capital cushion that Nat City does and they were behind the curve in terms of taking markdowns," he said in an interview.

"This bailout plan will come through in one way or another and it will be a net beneficiary" to those banks that "have been most aggressive at marking down [assets] and ones that have excess capital that would enable them to take accelerated losses," he says. "The two names that really jump out in that context [are] Bank of America and National City. The one that stands out as not is Wachovia."