Fifth Third Raising Capital, Sinks to Low

Updated from 11:43 a.m. EDT

Fifth Third Bancorp(FITB Quote) hit a new 52-week low after the big Midwestern bank slashed its dividend and said it was raising $2 billion in capital.

The Cincinnati-based bank said the moves to strengthen its capital position were necessary "in light of continued deterioration in credit trends during the second quarter of 2008 and its view that conditions are unlikely to improve in the near term," the company said in a press release.

Fifth Third cut is dividend by two thirds to 15 cents a share. The new dividend will be payable on July 22.

It also plans to add $1 billion to its Tier 1 capital ratios through the sale of convertible preferred stock. The bank's underwriters will have the option to purchase an additional $150 million of depositary shares to cover over-allotments.

The company also plans to sell certain "non-core businesses" over the next few quarters, that would add roughly $1 billion to common equity capital, it said.

Shares recently were falling 18% to $10.49 on trading volume that was five times the average daily volume.

"We are taking a number of significant steps to fortify our balance sheet and improve the quality and composition of our capital base," CEO Kevin Kabat said in a statement. "We expect these actions to enable us to weather further depreciation in home prices as well as significant weakening in economic activity relative to current levels."

"Many areas of our business are performing well," he added. "However our bottom line results won't meet our expectations. We are not satisfied with these results and know that they are as disappointing to investors as well."