National City Cuts Dividend, Jobs; To Seek Capital

National City, one of the 10 largest U.S. banks, said Wednesday it will cut its common stock dividend 49 percent and eliminate 900 jobs as it stops offering mortgages through brokers.

A home is advertised for sale at a foreclosure auction in Pasadena, California.
Reed Saxon
A home is advertised for sale at a foreclosure auction in Pasadena, California.

The company also said it plans to raise more capital to help it cope with deteriorating credit markets, and hired Goldman Sachsas an adviser.

Chief Executive Peter Raskind said in a statement that National City needed to take "aggressive steps" to cope with disruptions in the mortgage, housing and credit markets.

Cleveland-based National City operates about 1,445 branches, mainly in U.S. Midwest states.

It has significant operations in Florida, Ohio and Michigan, which ranked second, third and fifth nationwide in foreclosures in November, according to RealtyTrac.

In morning trading, National City shares fell 59 cents, or 3.6 percent, to $15.87. The stock fell 55 percent last year.

National City said it will reduce its quarterly dividend to 21 cents per share from 41 cents, after having increased it in 15 straight years.

The higher dividend had equated to a 10 percent yield.

National City joined Washington Mutual and IndyMac Bancorp among large mortgage lenders to lower their dividends in the last two months. Freddie Mac, the second-largest U.S. mortgage finance company, also cut its dividend.

National City's latest job cuts affect about one-seventh of its mortgage staff, which totaled 6,274 in November. The bank employed 32,804 people overall.

The cuts are in addition to 2,500 jobs that National City eliminated in last year's second half, as it merged its home equity and mortgage lending units, and stopped making many kinds of home loans.

Separately, National City said it intends to issue non-dilutive, Tier 1 capital by March.

It said this would speed up plans to reach the high end of a targeted 7 percent to 8 percent ratio for Tier 1 risk-based capital. Regulators consider the capital level a measure of ensuring that banks have enough funds to cover losses.

In last year's third quarter, National City lost $19 million, hurt by losses related to its former First Franklin Financial Corp subprime mortgage unit.

While National City sold the unit in Dec. 2006 to Merrill Lynch for $1.3 billion, it kept several billion dollars of loans and is winding them down.

National City on Dec. 17 projected it would set aside $700 million for fourth-quarter loan losses.