National City Corp., Ohio's largest bank, will eliminate another 900 jobs and halve its dividend, the first reduction since the payout began in 1935.
The lender plans to raise capital and hired Goldman Sachs Group Inc. as its adviser, National City said yesterday. The bank is halting home loans through brokers and firing the employees in that business, bringing total cuts to 3,400, or about 10 percent of its work force, in one year.
National City is still reeling from the U.S. housing slump a year after selling its subprime mortgage unit to Merrill Lynch & Co. It now expects to make $15 billion to $20 billion in home loans in 2008, compared with a previous projection of $35.7 billion.
"The housing market was poised for a correction and then it corrected with a high degree of suddenness," Chief Executive Officer Peter Raskind said in an interview. "It's not clear to me that anything can be done prudently to dramatically improve that process."
The bank's shares fell 87 cents, or 5.3 percent, to $15.59 on the New York Stock Exchange yesterday.
National City said it will pay 21 cents a share Feb. 1 to shareholders of record on Jan. 14. The dividend previously was 41 cents a share.
"National City is probably at the front edge of cleaning up the mess," analyst Gerard Cassidy of RBC Capital Markets said. "They still have some heavy lifting going forward. We think others are going to follow. The housing problems are going to continue through 2008."
U.S. home foreclosures rose 68 percent in November from a year earlier as adjustable-rate mortgages left subprime borrowers unable to meet higher payments, according to RealtyTrac Inc., an Irvine, Calif.-based seller of housing information.
The bank will continue making home loans through its 300 mortgage offices and 1,448 bank branches, spokeswoman Kristen Baird Adams said. It had about 34,000 employees as of Sept. 30, according to a regulatory filing.
Most of National City's problem loans stem from markets, including California, where housing prices surged and then declined, Raskind said.
About a third of the bank's branches are in Ohio and Michigan. Ohio has the third-highest foreclosure rate in the United States, and Michigan ranked sixth, according to RealtyTrac.
National City took a $200 million charge Dec. 17 related to the declining value of mortgage securities and said it expects to set aside about $700 million in the fourth quarter to cover bad loans.
The bank said it has "elevated risk" from loans made by its former First Franklin unit and its closed National City Home Equity business.
National City sold First Franklin, which principally made loans to borrowers with less than prime credit, to Merrill Lynch in December 2006.