Oct. 21 (Bloomberg) -- National City Corp., Fifth Third Bancorp and KeyCorp, Ohio's largest banks, reported third-quarter losses amid the worst housing slump since the Great Depression.

National City will cut about 4,000 jobs, or 14 percent of its workforce, over the next three years after posting a net loss of $729 million, or 85 cents a share, the Cleveland-based company said in a statement today. Fifth Third in Cincinnati reported a quarterly loss of $56 million, or 61 cents, and Cleveland-based KeyCorp's loss was $36 million, or 10 cents.

The results are ``not terribly surprising, it just shows that you have a group of banks that are not only in a recessionary environment, generally speaking, and also in a geography that's in secular decline,'' said Sterne, Agee & Leach Inc. analyst Sean Ryan. ``The reality is if you're making loans in Ohio there's not a lot of places to hide.''

The losses add to pressure on the managements of National City, Fifth Third and KeyCorp after shares of the companies fell more than 50 percent this year. National City Chief Executive Officer Peter Raskind said in the statement that the bank was hurt by ``extraordinary disruptions'' in the financial markets.

KeyCorp's stock rose 12.4 percent to $10.95 at 4:01 p.m. in New York Stock Exchange composite trading after the bank said it expects to obtain capital through the U.S. government's program to recapitalize banks. National City's shares rose 2.4 percent to $2.99 after CNBC reported unconfirmed reports of a possible takeover ``in the not too distant future.''

Minnesota to Alabama

``As our results indicate, we aren't immune to disruptions in the capital markets and weakening economic conditions,'' Fifth Third CEO Kevin Kabat said in today's statement. ``Higher credit costs once again drove bottom-line results.''

While Ohio's largest banks reported bigger third-quarter losses, Minnesota's and Alabama's biggest banks said third- quarter profit declined.

U.S. Bancorp in Minneapolis said third-quarter profit dropped 47 percent to $576 million, or 32 cents a share, missing analysts' estimates, as the value of investments declined and reserves for bad loans to builders and homebuyers increased.

Regions Financial Corp. said profit fell 80 percent to $79.5 million, or 11 cents, as declining property values in the southern part of the country led to loan losses for the Birmingham-based lender.

Shares of U.S. Bancorp fell 92 cents to $30.20 in New York Stock Exchange composite trading, Regions Financial gained 65 cents to $11.29 and Fifth Third rose 2 cents to $12.25.

Raskind and Kabat, both 51, pointed to signs of improvement at National City and Fifth Third. Raskind said National City is gaining market share and has ``strong capital,'' while Kabat said Fifth Third's ``core earnings power'' remains positive.

Paulson Plan

National City, the biggest of the Ohio banks, reported its fifth straight quarterly loss. After preferred dividends, the third-quarter loss was $5.1 billion, or $5.86 a share. The company raised $7 billion in April, giving Raskind financial leeway to contain losses from subprime mortgages and loans tied to home equity, construction and cars.

Treasury Secretary Henry Paulson has offered to inject $125 billion into smaller banks by purchasing preferred shares, part of a $700 billion industry bailout that also may include buying defaulted loans.

National City said it's premature to discuss participation in Paulson's proposal. Minneapolis-based U.S. Bancorp and Regions Financial in Birmingham, Alabama said they plan to ask to be included. Fifth Third said it may consider participation.

KeyCorp will discuss the amount of capital to be obtained through the government plan with its board over the next week, and will likely apply for more than the expected $1.1 billion minimum, but less than the projected $3.3 billion maximum, CEO Henry Meyer said on the conference call.

Bank Failures

National City's provision for loan losses tripled to $1.18 billion in the third quarter from a year earlier. The company's total deposits averaged $98.7 billion during the third quarter, declining less than $1 billion from the previous quarter and up $5.2 billion from a year earlier. The bank said new customers added in the quarter ``partially offset declines in deposit balances in excess of FDIC insurance limits.''

``We did experience a short-term decline in deposits from highly publicized events'' in September, spokeswoman Kristen Baird Adams said in an e-mailed statement today, referring to failures that included Washington Mutual Inc. and the rescue of Wachovia Corp. ``However, losses tended to be concentrated around a relatively small number of larger balance accounts, while our broader base of nearly four million retail customers was significantly more stable.''

The amount KeyCorp set aside to cover bad debts from continuing operations rose fivefold to $407 million during the third quarter. The company has already stopped lending to builders in places where the bank has no community banking operations after defaults in warm-weather states, including Florida and California.

``We have experienced the most severe financial crisis any of us has known in our business lifetime,'' Meyer said in a statement.

To contact the reporter on this story: Linda Shen in New York at lshen21@bloomberg.netDoug Alexander in New York at dalexander3@bloomberg.net

Last Updated: October 21, 2008 16:23 EDT