AP
National City Cutting Dividend, Jobs
Wednesday January 2, 6:54 pm ET
My M.R. Kropko, AP Business Writer
National City Cutting Its Dividend 49 Percent, Slashing 900 Jobs


CLEVELAND (AP) -- Regional bank National City Corp. said Wednesday it is slashing its dividend 49 percent and shutting down its wholesale mortgage division, eliminating 900 jobs, due to weakened housing and credit markets.

The dividend was reduced to 21 cents per share from 41 cents per share, payable Feb. 1 to shareholders of record as of Jan. 14.

The news sent National City shares tumbling 5.3 percent, or 87 cents, to $15.59 in trading Wednesday. The shares had been as high as $38.94 in the past year.

Investors tend to choose bank stocks for stability and as a way to generate income from dividends.

National City also plans to raise more capital during the first quarter and has hired Goldman Sachs and Co. as its adviser.

The job cuts announced Wednesday bring to 3,400 the number of jobs eliminated in recent months as National City restricted mortgage originations to focus on prime rate borrowers with solid credit histories. Despite leaving the wholesale lending business in which brokers originate loans for National City, National City will continue to make loans through its retail banking offices.

National City has been hit hard in recent months because of rising delinquencies and defaults among mortgages and a severely declining housing market. It had increased its dividend at least once every year since 1993.

"It's a decision that was very difficult but one that the board firmly believes is right for the circumstances we face today," Peter Raskind, National City's chairman and chief executive, said in an interview Wednesday.

"We expect 2008 to continue to be a challenging year," Raskind said. "In particular, the pressure on the housing markets won't abate quickly. There's an inventory of homes to be absorbed nationally, for the entire industry. And it will take some time for that to happen."

National City expects mortgage originations in 2008 of about $15 billion to $20 billion, less than half of the $45 billion it originated in 2006. The total through the first nine months of 2007 was about $35 billion.

The dividend cut may be part of a growing trend in the banking industry. In a note to investors Dec. 26, Goldman analysts wrote that many financial organizations will have to find ways, such as cutting a dividend, to secure capital.

On Dec. 10, Seattle-based Washington Mutual, which plans to get out of the subprime lending business, cut its dividend and eliminated 3,150 jobs due to the mortgage and credit market. It reduced its dividend to 15 cents a share, from 53 cents.

Cleveland-based National City operates 1,400 bank branches in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania and some other markets.

http://www.NationalCity.com.