The American bank credited with selling the first mortgage in the US yesterday said that it will cut 800 jobs, halve its dividend, and raise new capital to shore up its balance sheet.

National City Corporation, one of America’s biggest banks with about $140 billion (£70.7 billion) worth of assets under management, said that it plans to reduce the number of mortgages it sells and to stop lending through brokers.

The statement from the Ohio-based bank hit shares in the group, which fell 5.35 per cent on Wall Street to $15.58. The stock has now fallen 59 per cent since its highest point last year.

Peter Raskind, chairman and chief executive of National City, said that it had hired Goldman Sachs, the investment bank, to raise “nondilutive” capital to bolster its balance sheet.

A substantial chunk of National City’s business is derived from selling mortgages to homeowners in states such as Ohio, Michigan and Florida – which have suffered some of the highest foreclosure rates across the United States. According to Realty-Trac, US home foreclosures rose 68 per cent in November compared with the same period the year before, with Florida and Ohio two of the three worst states.

Mr Raskind said: “We fully recognise that the dividend is an important element of return for shareholders and we did not take the decision to reduce it lightly. However, our board and management strongly believe that this action is necessary to help meet the challenges ahead and to continue as a strong competitor in the financial services industry.”

The bank will pay a quarterly dividend of 21 cents per share, instead of the anticipated 41 cents, on February 1. The dividend cut will come as a shock to shareholders, who have benefited from at least one dividend rise each year since 1993. The cut will save the bank about $500 million.

National City expects to sell between $15 and $20 billion worth of mortgages in 2008, compared with the previously forecast $35.7 billion.

It added that outstanding mortgages bought from brokers will be pooled into one fund and managed by a new team of financiers.

Two weeks ago the bank said it would set aside about $700 million to cover loan losses in the fourth quarter.

The 800 job cuts bring total redundancies to about 3,400 and Mr Raskind warned yesterday that conditions would “be quite challenging in 2008”.

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