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National City Posts Loss, To Raise $7 Billion

National City, a large U.S. Midwest regional bank, posted a first-quarter loss Monday after a large loan loss provision, reduced its dividend and said it would raise $7 billion of equity capital, sending its shares down nearly 19 percent.

The Cleveland-based bank posted a net loss of $171 million, or 27 cents per share, after a loan loss provision of about $1.4 billion, compared with a profit of $319 million, or 50 cents per share, in the year-earlier period.

Its board cut the common dividend to 1 cent per share from 21 cents per share.

The capital raise includes $985 million of private equity capital from Corsair Capital and one other private equity investor. The balance is being purchased by other investors, including several current institutional stockholders.

Corsair Capital Vice Chairman Richard Thornburgh will be named a director on National City's board. (Video: Richard Thornbugh discusses Corsair's investment in National City)

In the financing, National City will issue 126.2 million shares of common stock at $5 per share, which is about 40 percent below its $8.33 close Friday.

National City's shares fell $1.57 to $6.76 during morning trading on the New York Stock Exchange on Monday.

It will also issue 63,690 shares of certain contingent convertible perpetual non-cumulative preferred stock.

Corsair Capital and certain other investors will also receive warrants with a term of five years.

Goldman Sachs served as financial adviser and Sullivan & Cromwell and Jones Day served as legal advisers to National City. RBS Greenwich Capital served as financial adviser and Simpson Thacher & Bartlett served as legal adviser to Corsair Capital.