Wachovia Corp, the fourth largest banking chain in the United States based on total assets, announced Monday that due to its first-quarter loss of $350 million (20 cents a share), it decide to reduce its quarterly dividend 41 percent to 37.5 cents a share from 64 cents.

The company Charlotte, North Carolina-based company said it will issue common stock and convertible preferred stock to raise capital.

Despite a positive forecast of a 44 cents a share growth from analysts polled by FactSet, Wachovia reported a loss of 14 cents a share, excluding merger-related expenses. Wall Street analysts predicted that Wachovia would earn 40 cents per share, according to Thomson Financial.

Wachovia, one of the largest providers of financial services in the United States, earned $2.3 billion, or $1.20 a share, in first quarter of 2007.

The measure of cutting its quarterly dividend will enable Wachovia to save $2 billion of capital annually "to build capital ratios and provide more operational flexibility."

"The precipitous decline in housing market conditions and unprecedented changes in consumer behavior prompted us to update our credit reserve modeling and rely less heavily on historical trends to forecast losses," said CEO Ken Thompson according to CNNMoney.com.

The banking chain also announced that it took market-disruption valuation losses of $2 billion during the quarter. Its first quarter provisions of $2.8 billion were a sign of a severe deterioration in the residential housing market, particularly in specific markets in California and Florida.