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May 2 (Reuters) - South Financial Group Inc TSFG.O slashed its quarterly dividend and said it plans to issue preferred stock and debt in an effort to boost its capital level.
South Financial shares, which touched a high of $17.13 in early trade on Friday, shed most of their gains and were trading up more than 8 percent at $7.03 on Nasdaq.
The bank is the latest to join a pool of small and medium-sized banks cutting dividends and issuing stock to better their capital reserves amid a slump in the financial markets.
Last month, First Horizon National Corp (FHN.N) suspended payment of its cash dividend, while Colonial BancGroup Inc CNB.N slashed its dividend by half. Both banks had also set plans to raise capital by offering additional stock.
South Financial plans to issue about $250 million of convertible preferred stock, bank-level subordinated debt of up to about $100 million and reduce quarterly cash dividend to 1 cent per share from 19 cents a share.
The slash in dividend will enable the Greenville, South Carolina-based company to preserve about $52 million annually.
South Financial said it has accepted commitments to purchase 250,000 shares of preferred stock with a purchase price and liquidation value of $1,000 per share. (Reporting by Sweta Singh; Editing by Himani Sarkar)