Reginal Divide

Bancorp (NasdaqGS:FITB), a large U.S. regional bank, said on Wednesday it plans to raise at least $2 billion of capital and will slash its dividend by 66 percent to cope with mounting credit losses.

Shares of Fifth Third fell $1.78, or 14 percent, to $10.95 in pre-market trading.

The bank, the second-largest based in Ohio, joins a growing number of rivals to raise capital and slash their dividends this year, including National City Corp (NYSE:NCC - News) and KeyCorp (NYSE:KEY - News), the state's largest and third-largest banks.

Ohio has been among the states hardest hit by the nation's housing slump. Fifth Third is based in Cincinnati, while National City and KeyCorp are based in Cleveland.

Fifth Third said it expects to issue $1 billion of convertible preferred shares and raise at least $1 billion more by selling non-core businesses in the next several quarters.

It also said it will cut its quarterly dividend to 15 cents per share from 44 cents.

"We expect these actions to enable us to weather further depreciation in home prices as well as a significant weakening in economic activity," Chief Executive Kevin Kabat said in a statement. "Our bottom-line results won't meet our expectations. We are not satisfied."

The bank was not immediately available for further comment.

Fifth Third said the moves will help it boost its Tier-1 capital ratio, a measure of its ability to cover losses, to 8.5 percent, above the 6 percent that regulators say reflects a "well-capitalized" bank.

It said it expects net charge-offs to equal 1.6 percent to 1.65 percent of loans and leases in 2008, and a higher percentage in 2009. It expects to set aside $350 million to $375 million more in the second quarter than actual net charge-offs, and that its provisioning will also exceed charge-offs in 2009.

Fifth Third said it named Kabat chairman, replacing George Schaefer, who is retiring. Schaefer was also chief executive until April 2007.

The bank has $111 billion of assets and operates 1,314 branches in 12 U.S. states, mainly in the Midwest and Southeast.