NEW YORK (Reuters) -- National City Corp., Ohio's biggest bank and sub-prime lender, may get $6 billion to $7 billion from a group led by Corsair Capital LLC to bolster its balance sheet, said a person with knowledge of the situation.

The investors will pay $5 a share, about 40 percent less than National City's closing price on April 18, said the person, who didn't want to be identified before a possible announcement later today. The company, led by Chief Executive Officer Peter Raskind, also plans to slash the quarterly dividend to 1 cent a share from 21 cents, the second cut this year, the person said.
``Shareholders continue to get penalized,'' said Gerard Cassidy, a Portland, Maine-based analyst at RBC Capital Markets, who has a ``sector perform'' rating on National City. ``It's another major company going to the capital markets to enable them to survive in this incredibly deflationary environment.''
National City climbed 6 cents to $8.39 in early German trading today. The bank, which lost 78 percent of market value in the past year, has been hurt by Ohio's housing slump. The state had the seventh-highest foreclosure rate in the U.S. last month, data compiled by research firm RealtyTrac Inc. show. Financial companies have disclosed more than $250 billion of write-downs and credit losses from the collapse of sub-prime mortgages.
Ignacio Jayanti, president of Corsair, didn't immediately respond to a call seeking comment. National City spokeswoman Kristen Baird Adams declined comment. Parts of the transaction were reported yesterday by the Financial Times. Ties to JPMorgan
New York-based Corsair, founded in 1993 by JPMorgan Chase & Co., will own 9.9 percent of National City after the capital raising and Corsair's vice chairman, Richard Thornburgh, will get a seat on National City's board, the person said.
Corsair has invested in financial services companies in countries including Argentina, Brazil, Korea, Poland and Sweden, according to the firm's Web site. Thornburgh joined Corsair in 2006 after serving as vice chairman of Credit Suisse Group's investment-banking unit.
National City joins banks and securities firms, including Citigroup Inc., Wachovia Corp. and Washington Mutual Inc., that have been forced to seek cash to replenish capital after subprime-related losses. The bank ranks as the worst performer in the 24-member KBW Bank Index during the past 12 months.
National City's Tier 1 capital ratio, a measurement of its ability to withstand loan losses, will increase to more than 11 percent with the new funds from 6.53 percent on Dec. 31, the person familiar with the transaction said. U.S. regulators label banks with ratios of 6 percent or more as ``well capitalized.''
National City was under pressure to strengthen its balance sheet before the company reports first-quarter results tomorrow, said Scott Fine, a finance professor at Case Western Reserve University in Cleveland. The bank's $150 billion in assets and network of about 1,400 branches makes it attractive to potential investors, he said in an April 18 interview.
The company ranked among the 10 biggest originators of loans to people with poor credit histories in 2006. National City sold its sub-prime loan unit, First Franklin Financial, at the end of that year to Merrill Lynch & Co., where it contributed to a record loss at the New York-based securities firm. National City kept some of the loans made by First Franklin, saddling it with losses. Potential Bidders
National City said April 2 it hired Goldman Sachs Group Inc. as an adviser to consider ``a range of strategic alternatives.'' Raskind told the Cleveland Plain Dealer newspaper on April 11 that a sale was one of the options.
The Wall Street Journal said yesterday that Toronto-based Bank of Nova Scotia, Cleveland-based KeyCorp and Cincinnati-based Fifth Third Bancorp, won't make offers for National City. The report cited unidentified people familiar with the situation. New York-based private-equity firms Kohlberg Kravis Roberts & Co. and Warburg Pincus LLC also considered investing, the Journal said.
National City's management was probably against a sale to in-state rivals KeyCorp or Fifth Third because it would have led to job losses, RBC Capital's Cassidy said. The deal with the Corsair-led group ``gives National City another day to play the game,'' he said.
National City sold $400 million of bonds in January after the company reported a $333 million fourth-quarter loss. Standard & Poor's Corp. on March 21 lowered its outlook for National City to negative from stable, citing expected losses on home loans.