DOW JONES NEWSWIRES

Marshall & Ilsley Corp. (MI) said Thursday it has essentially eliminated its dividend and enacted $100 million in cost cuts as Wisconsin's largest bank swung to a fourth-quarter loss on slumping credit quality.

Shares slumped 16% premarket to $8.99. The stock hasn't traded below $10 in regular trading since 1996.

The company, which received $1.7 billion in November from the Treasury Department under the Troubled Asset Relief Program, is nearly finished cutting 8% of its nearly 10,000-person workforce.

The moves, including the quarterly dividend cut to 1 cent a share from 32 cents, reflect "the extent to which the current recession has had an impact on our economy," said Chief Executive Mark Furlong. Despite the "disappointing results," he said the company's "excess capital and strong levels of reserves" would keep it "ahead of the industry's challenges."

Marshall & Ilsley reported a net loss of $391.2 million, or $1.55 a share, compared with year-earlier net income of $493.9 million, or $1.83 a share.

Revenue edged up 0.9% to $635.1 million.

The provision for loan and lease losses more than tripled to $850.4 million from $235.1 million. Charge-offs, loans thought not to be collectible, surged to 5.38% of average loans and leases from 1.67%. Nonperforming loans, or those near default, rose to 3.62% from 2%.

Net interest margin, the difference between interest gained on loans and paid on deposits, rose to 3.18% from 3.13%.

Marshall & Ilsley's problems stem not only from its struggles with its heavy exposure to some of the most troubled housing markets, but also from its especially large exposures to commercial construction loans. In mid-December, UBS analyst Matthew O'Connor predicted Marshall & Ilsley and other banks would post a 2009 loss, due to an expected "severe" commercial real estate credit cycle. A few weeks earlier, Moody's put its credit ratings on Marshall & Ilsley on watch for downgrade.

-By Mike Barris, Dow Jones Newswires; 201-938-5658; mike.barris@dowjones.com

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