Updated from 9:12 a.m.US Bancorp ( USB) on Wednesday said it was cutting its quarterly dividend 88.2% to 5 cents a share, the latest big bank to slash its payout to preserve capital. The company paid a dividend of 42.5 cents a common share in the second quarter last year. The reduction will save the bank $2.6 billion in 2009, it said. Chairman, President and CEO Richard Davis, in a press release, said the bank's capital position is strong, but the "increasing focus on common equity as a measure of financial strength" was a factor in the decision. Preserving capital also will allow the bank to repay the government's preferred equity investment made through the Troubled Assets Relief Program, he said. "The decision to reduce our quarterly dividend was thoughtfully considered and very difficult, given the importance of the dividend to our shareholders," Davis said. "It was, however, the right decision, as our industry continues to confront uncertainty in the financial markets and a weakening economy." US Bancorp is regarded by many to be one of the better performing banks in the credit crisis, but it is not alone in reducing its quarterly payout as a preemptive move. JPMorgan Chase ( JPM), also heralded for its handling of the turbulent financial landscape, cut its dividend to 5 cents last week. PNC Financial Group ( PNC) also cut its dividend to 10 cents a share. Citigroup ( C) and Bank of America ( BAC) have not only had to slash their dividends, but also have been forced to go back to the government for second helpings of preferred equity investments and hundreds of billions in backstops for shaky assets.
Davis noted the company's tier-1 capital ratio was 10.6% at the end of 2008. He said the company intended to return the dividend "to a normalized rate as soon as possible." US Bancorp shares were falling 5% to $11.95 in recent trading.