U.S. regional banks' shares drop on Fifth Third woes

BANGALORE (Reuters) - The shares of several large U.S. regional banks that lend in Florida or Michigan fell sharply on Wednesday after Fifth Third Bancorp (FITB.O) said it will slash its dividend 66 percent and raise at least $2 billion of capital to cope with mounting credit losses in those states.

Among the largest percentage decliners in the KBW Bank Index .BKX were the shares of BB&T Corp (BBT.N), Regions Financial Corp (RF.N) and SunTrust Banks Inc (STI.N), which have each previously reported concerns about loan quality in Florida.

Comerica Inc (CMA.N), meanwhile, was also one of the biggest decliners. That bank maintains a strong Michigan presence, despite having moved its headquarters to Dallas from Detroit last year.

In a regulatory filing, Fifth Third said it expects second- quarter consumer net charge-offs to mount in large part because of "significantly higher residential real estate related losses primarily in Florida and Michigan."

Fifth Third also said commercial nonperforming assets may rise 45 percent from the first quarter, mainly from deteriorating commercial construction and mortgage portfolios in Florida and eastern Michigan. It projected a 35 percent increase in consumer nonperforming assets, in part because of the two states.

SunTrust came under further pressure on Wednesday after Standard & Poor's Equity Research downgraded the bank's rating to "sell" from "hold" and said the bank might cut its dividend to preserve capital.

Spokesmen for BB&T, Comerica and SunTrust all declined to comment, while a Regions Financial Corp spokesman said the bank was "aggressively managing the credit cycle" and had increased its loan loss provision.

Goldman Sachs & Co analysts projected on Tuesday that U.S. banks might need to raise an additional $65 billion of capital to combat mounting credit losses after having previously raised $120 billion.

BB&T and Comerica shares closed down by more than 7 percent each, while Regions fell by more than 10 percent and SunTrust by 9 percent in trading on Wednesday. The KBW index was down 2.9 percent.

(Reporting by Jon Stempel, additional reporting by Phil Wahba in New York; Editing by Andre Grenon)