In the banking world, the worst time to raise money is when you really need it. Ironically, this is the predicament for many banks – especially those that binged on subprime mortgage.

One of the latest victims is Fifth Third Bancorp (NASDAQ: FITB), which traces its roots back to 1858 (the company is the result of the merger of Third National Bank and yes, the Fifth National Bank).

Well, Fifth Third announced Wednesday that it plans to raise a minimum of $2 billion, which will include convertible preferred shares as well as the sale of non-core assets (for example, there is an electronic processing business that is likely to fetch a good valuation). There's more: the company says it will reduce the dividend by 66% (I guess it's better than nothing).

Basically, Fifth Third has heavy concentration in Florida and Michigan, both undergoing economic stress (whether from autos, real estate or construction). There are also some problems with leveraged leases that recently also suffered an adverse court ruling.

Unfortunately, in the current environment, it's not going to be easy to raise new capital. That is, the terms are likely to be harsh.

And investors are already anticipating this. In Wednesday's trading, Fifth Third's shares plunged 27% to $9.26.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

How would one describe today other than as a real disappointment? The DJIA broke 12,000 for the first time since March and the pressure here makes one wonder if that magic psychological level will hold. Oil was up over $136/barrel late in the day over strikes in Nigeria and lower inventories.

Here are today's unofficial closing levels:

• DJIA 12036.38 (-123.92)
  
• S&P500 1338.71 (-12.22)
  
• NASDAQ 2429.71 (-28.02)
  
• 10YR T-Note 4.154% (-0.071%)
• 52-WEEK LOWS
• Top 10 Analyst Calls

AMR Corp. (NYSE: AMR) saw another drop of almost 5% by the final minutes, down to $5.42, after the company presented its estimates on fuel use, costs and hedges today at a Merrill Lynch Global Transportation Conference.

Fifth Third Bancorp (NASDAQ: FTIB) is recently trading down $1.73 to $11 in pre-open trading.

FITB announced the planned issuance of $1 billion in tier 1 capital in the form of convertible preferred shares. FITB declared a Q2 dividend of 15 cents, a reduction from the previous 44 cents per share quarterly level. FITB says the anticipated sales of non-core business would supplement common equity by an estimated additional $1 billion.

FITB overall option implied volatility of 86 is above its 26-week average of 47 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

National City (NYSE: NCC) closed at $9.79 Thursday.

The WSJ reported Fith Third Bancorp (NYSE: FITB) is considering a bid to purchase NCC according to people familiar with the situation.

NCC announced on April 1 that its Board of Directors are reviewing a range of strategic alternatives for the company.

FITB has $110 billion in assets. NCC has $150 billion in assets.

NCC May option implied volatility of 110 is above its 26-week average of 58 according to Track Data, suggesting larger price fluctuations.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com