Fifth Third to raise $2 billion capital, cut dividend
Fifth Third Bancorp (FITB.O: Quote, Profile, Research, Stock Buzz), a large U.S. regional bank, said on Wednesday it plans to raise at least $2 billion in capital and slash its dividend 66 percent to cope with mounting credit losses, causing its shares to fall as much as 18.6 percent to their lowest level since 1995.
The second-largest bank based in Ohio said it would sell $1 billion of convertible preferred shares and at least $1 billion of “non-core” businesses over the next several quarters.
It cut its quarterly dividend to 15 cents per share from 44 cents, saving well over $600 million a year.
Fifth Third said credit losses will result in second-quarter profit of 1 cent to 5 cents per share, its 10th straight quarterly profit decline. Analysts’ average profit forecast is 42 cents per share, according to Reuters Estimates.
“It reflects the difficult credit environment,” said Gary Townsend, co-founder of Chevy Chase, Maryland-based money manager Hill-Townsend Capital payday loan cash advance loan. “We will continue to see dividend cuts and capital raises. There is no reason to think it is over.”
Many large banks have raised capital and cut their dividends this year as the housing and credit market crises deepen further than many observers expected.
Other banks to undertake similar actions include National City Corp (NCC.N: Quote, Profile, Research, Stock Buzz) and KeyCorp (KEY.N: Quote, Profile, Research, Stock Buzz), Ohio’s largest and third-largest banks. The state has been among the hardest-hit by the housing downturn.
Kevin Kabat, chief executive of Cincinnati-based Fifth Third, said in a statement that his actions should help Fifth Third weather further home price declines and “significant weakening” in economic activity.
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