Fifth Third Bancorp shares plummeted 27 percent Wednesday after the regional bank, facing rising loan losses, said it will slash dividends and try to raise $2 billion with a stock offering and sale of noncore businesses.

Fifth Third also predicted second-quarter earnings would fall far below Wall Street expectations. The bank cited the U.S. housing and credit crisis that has battered the financial sector, hitting particularly hard in key Fifth Third states like Ohio, Michigan and Florida.

Investors rushed to unload Fifth Third shares, which fell $3.47, to close at $9.26, in very heavy trading. The stock, which traded as high as $43.20 within the last year, has lost more than half its value in just three weeks, after closing at $18.85 on May 28.

Fifth Third is planning a $1 billion offering of convertible preferred shares. It also plans to raise $1 billion by selling unspecified operations, expecting those sales will be completed over the next several quarters.

The company is cutting its quarterly dividend by nearly two-thirds to 15 cents from 44 cents. The smaller dividend will be paid on July 22, when the company will report second-quarter earnings, to shareholders of record on June 30.

Banks across the country have been forced to raise new capital, slash dividends and sell portions of their operations as they look for ways to build up capital bases severely eroded by losses tied to rising defaults among mortgages.

Ohio’s housing slump is taking its toll on its banks _ Cleveland-based KeyCorp last week said it would half its dividend and issue stock to help raise some $1.5 billion. Cleveland-based National City Corp. and Columbus, Ohio-based Huntington Bancshares Inc. have taken similar steps.

In a research note Tuesday, Goldman Sachs estimated U.S. banks have raised $120 billion in new cash thus far, but that another $65 billion will likely be needed to cover mounting losses from loan portfolios.

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

Kabat has been named chairman of the board of directors, the company said, replacing George Schaefer Jr., who announced in April he was retiring. He was succeeded last year as CEO by Kabat.

In a regulatory filing, Fifth Third said second-quarter earnings are expected to be 1 to 5 cents a share. Analysts surveyed by Thomson Financial were expecting 40 cents a share.

“Our bottom line results won’t meet our expectations,” Kabat said. “We are not satisfied with these results and know that they are as disappointing to investors as well.”

A spokeswoman for insurer Cincinnati Financial Corp., a major investor in Fifth Third, said the company was following developments.

“Our management is reviewing the specific facts of what has been announced,” said spokeswoman Joan Shevchik. “It’s too early to make a public comment.”

Meanwhile, a Standard & Poor’s Equity Research bank analyst, Erik Oja, cited concerns about declining credit quality in a downgrade of Fifth Third shares Wednesday to “sell” from a hold recommendation.

Credit ratings agency Moody’s Investors Service said Wednesday it placed Fifth Third’s long-term deposit and debt ratings on review for a potential downgrade.

“Fifth Third’s profitability and efficiency are likely to remain below our expectations because, in Moody’s opinion, spreads on its loan portfolio will remain tight and provisions for loan losses will grow in the foreseeable future,” Moody’s analyst Peter Routledge said in a statement.

In the first quarter, Fifth Third’s profit fell 19 percent, in large part due to increasing loan-loss reserves. The bank set aside $544 million to cover bad loans during the quarter, more than five times the $84 million set aside during the first quarter in 2007.

Fifth Third said it expects charge-off levels among loans to continue to rise into 2009, forcing it to set aside even more capital to cover losses due to the downturn in the mortgage and real estate markets.

Charge-offs are loans written off as not being repaid.

Fifth Third operates 1,314 full-service banking centers, along with automatic tellers and grocery store banking, in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina.

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AP Business Writer Stephen Bernard in New York contributed to this report.

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