July 14 (Bloomberg) -- National City Corp., Ohio's biggest bank, plunged as much as 31 percent in New York trading as last week's collapse of IndyMac Bancorp Inc. spurred concern about the survival of regional U.S. banks saddled with bad home loans.

National City dropped $1.22 to $3.20 a share at 11:50 a.m. in New York Stock Exchange composite trading, and fell as low as $3.04. The last time shares of the Cleveland-based bank sold for less was June 1984. Trading was halted for pending news. Washington Mutual Inc., the biggest U.S. savings and loan, slid as much as 33 percent, Zions Bancorporation declined 17 percent and M&T Bank Corp. sank 15 percent.

``National City has been included in some of this talk of further bank failures,'' said Terrence McEvoy, an analyst at Oppenheimer & Co. in Portland, Maine who added that he doesn't believe the bank is in danger. He rates the bank at ``market perform.''

Investors are speculating about which banks may fail after the demise of California-based IndyMac, which once ranked as the second-biggest U.S. mortgage company. National City said in June it signed an accord with federal regulators tied to capital, risk and liquidity management. The bank has said it's well- capitalized after raising $7 billion in May from private-equity investors led by Corsair Capital Management LLC.

A call to National City spokeswoman Kristen Baird Adams wasn't immediately returned. The company is expected to report its second-quarter earnings on July 24.

Dividend Cuts

The collapse of IndyMac and deterioration in the construction, mortgage and auto lending markets indicate that losses at U.S. regional banks will force dividend cuts and additional capital raising, said analysts at Goldman Sachs Group Inc. and CreditSights Inc.

Goldman put Zions, Utah's biggest bank, on its ``conviction sell'' list. Lehman Brothers Holdings Inc. predicted $26 billion in cumulative losses for Seattle-based Washington Mutual, and M&T, based in Buffalo, New York, posted a 25 percent decline in second-quarter profit.

Banks may report record unrealized securities losses of $35 billion in the second quarter, up 64 percent from the previous three months, the Goldman analysts said in a report today. Zions, SunTrust Banks Inc., Regions Financial Inc., Comerica Inc. and Bank of America Corp. are among companies that Goldman and CreditSights said may cut their dividends to help restore depleted capital.

The Goldman analysts estimated banks will require at least another $60 billion in addition to the $125 billion they've already raised to bolster capital.

Bank Run

IndyMac was seized after a run by depositors left the California mortgage lender short on cash last week. The government stepped in to help beleaguered home lenders Fannie Mae and Freddie Mac yesterday when Treasury Secretary Henry Paulson asked Congress for authority to buy unlimited stakes and lend to the companies to stem a collapse in confidence.

The decision to protect Fannie Mae and Freddie Mac was needed to ``stem the growing risk of credit contraction in the U.S.,'' the New York-based Goldman analysts said.

``Most all of the regional banks'' could need additional money to meet a benchmark ratio of 7.5 percent Tier 1 capital as a percentage of assets, CreditSights analyst David Hendler said in a report today. The ratio reflects a bank's ability to absorb loan losses. While banks must have a 6 percent Tier 1 ratio to be considered ``well capitalized,'' Hendler said rating firms and regulators prefer a higher number for ``some margin for error if stress scenarios play out even more harshly.''

Capital Ratios

SunTrust, Regions and Zions had Tier 1 ratios of less than 8 percent as of March 31 and face the largest capital shortfalls among the big U.S. regional banks, Hendler said. Five other banks that face ``moderate'' capital shortfalls include Comerica, Huntington Bancshares Inc., Marshall & Ilsley Corp., Sovereign Bancorp Inc. and First Horizon National Corp., Hendler said.

KeyCorp, Fifth Third Bancorp, National City, BB&T Corp. and PNC Financial Services Group Inc. ``should have sufficient capital to manage through our stress-case loss scenarios,'' Hendler said.

To contact the reporters on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net.

Last Updated: July 14, 2008 11:58 EDT