Fifth Third Bancorp, a Cincinnati-based bank that bought Charlotte-based First Charter Corp. less than two weeks ago, became the latest financial institution to dump a round of bad news on Wall Street, announcing Wednesday that it will slash its dividend, raise capital and sell off parts of its business.
Investors punished the shares, which closed at $9.26, down 27 percent for the day and at the lowest level since the mid-1990s.
It's been a bad week for most financials, including Charlotte-based Wachovia Corp. and Bank of America Corp.
Wachovia's shares dropped below $17, falling 1.6 percent to $16.88 Wednesday, their lowest since 1992. Bank of America's shares closed down 3 percent at $28.37, their lowest since 2001.
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“The upshot – we've got to be nearing the bottom, 'cause there's just not that much left!” wrote analyst Nancy Bush of NAB Research in New Jersey.
Fifth Third will slash its quarterly dividend 66 percent, to 15 cents from 44 cents. It will also issue $1 billion in convertible preferred shares and sell “certain non-core businesses” over the next several quarters, it said.
Those moves to shore up capital were made “in light of continued deterioration in credit trends,” the bank said.
In the first quarter, Fifth Third's profits were down 20 percent, to $286 million. By assets, Fifth Third is the 15th largest bank in the country.
“It does not look like the end is in sight on credit deterioration,” analysts at Sandler O'Neill + Partners wrote Wednesday about Fifth Third.
Added Bush: “It's another lovely day in the regional banking neighborhood, thanks to (Fifth Third).”
Fifth Third also said that its chief executive, Kevin Kabat, will become chairman of the board, replacing George Schaefer Jr., who retired Tuesday. Schaefer retired as CEO in 2007.