Updated from 9:52 a.m. EDT

KeyCorp ( KEY) reported a far wider first-quarter loss on Tuesday than the market expected, citing a sharp decline in asset values and a build to reserves for additional losses ahead.

The Cleveland-based bank lost $536 million, or $1.09 per common share, compared with a profit of $218 million, or 55 cents per share, a year earlier. The loss was five times greater than the average analyst estimate of 21 cents per share, according to Thomson Reuters.

In light of the results, Key's board of directors intends to slash its quarterly dividend to a penny per share from 6.25 cents per share, beginning with the second quarter, to retain an additional $100 million in capital each year.

Executives were also asked on a conference call whether Key would consider converting any of its $675 million in convertible preferred stock into common shares, a move that would boost capital metrics and tangible common equity, but dilute existing investors. CFO Jeff Weeden said management is "certainly looking at all the different opportunities that may be out there, and that is one that we have had discussions on."

Key's shares slid nearly 17% to $6.15 in recent trading.

"Our results reflect an extremely challenging operating environment and the expedient steps we continue to take to identify problem loans and to build Key's loan loss reserves," CEO Henry Meyer said in a statement.

Key added $857 million to its provision for loan losses, as net loan charge-offs climbed to $492 million, or 2.65% of average loans, from $121 million, or 0.67% a year ago, and $342 million, or 1.77%, at the end of 2008.

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