Analyst Dick Bove has some advice for National City: Sell. 

The Cleveland-based regional bank used to be a boring, steady commercial bank making plain-vanilla loans to solid Midwest companies. Then NatCity tried to kick it up a notch.
   
But then they hopped on the subprime mortgage bandwagon by acquiring First Franklin, a national lender. They expanded into Florida’s red hot real estate market by acquiring two savings and loans. These deals came as mortgage and real estate markets were peaking.

Bove also knocks the company for selling an income producing businesses and using the cash for stock buybacks.

“I would suggest that there is no bank in the United States that has exhibited less common sense than National City,” Bove wrote. “It needs to be sold.” 
   
And while NatCity managed to dump First Franklin on Merrill Lynch in 2006, just before the mortgage market tanked, the bank was still exposed to fast falling assets. 
   
On Wednesday NatCity slashed its dividend in half, cut 900 more jobs and shut down mortgage lending through brokers. Shares, down by more than half in the past year, fell to its lowest in nearly 12 years.
   
Bove, a veteran banking analyst known for plain talk, says it’s time for NatCity to turn over the keys. 
       
Loan quality, as measured by the volume of nonperforming loans, have more than doubled in the past two years — mostly from residential markets.     
   
Enter Goldman Sachs, which was hired by NatCity to seek “non-dilutive capital” to shore up its balance sheet. Bove speculates Goldman’s mandate may be much broader, including seeking a buyer or merger partner.
   
Wall Street bankers have predicted 2008 will be a busy year for bank mergers. Lenders challenged by thinner margins, rising credit costs and depleted capital will be under pressure to do a deal.
   
The 15th-largest U.S. bank for sure operates in some challenging markets — hard-hit states like Ohio and Michigan and now Florida’s real estate slump. 
   
Yet there’s been a flood of large foreign banks snapping up U.S. assets, and NatCity’s large Midwest footprint could be attractive. Tough times for NatCity and cross-town rival KeyCorp may also prompt the long awaited merger of equals, though such a deal may only create a bigger, troubled bank.
   
For now, NatCity is on sale. It has a market value of $10.4 billion, marked down by 55 percent over the past year. Its shares are cheap at 9.7 times estimated 2008 earnings, one of the lowest valuations among U.S. regional banks.
   
If more shareholders agree with Bove, then NatCity may have defaulted on its right to remain independent.