Wachovia Corp., the fourth largest U.S. bank, reported a first quarter loss on Monday and said it would strengthen its balance sheet by cutting the shareholder dividend and raising $7 billion in capital.

Investors reacted by sending Wachovia shares down more than 10 percent in trading.

I'm deeply disappointed with our first-quarter results, but I am confident we're taking prudent and appropriate actions in this challenging period to restore Wachovia to a more profitable path, said Chief Executive Ken Thompson.

The Charlotte, North Carolina-based bank lost $350 million in its first quarter, or 20 cents per share. In the same period a year ago it earned $2.3 billion. Revenue fell 4.5 percent to $7.9 billion. Analysts had expected a profit of 47 cents per share on revenue of $8.37 billion, according to a Reuters survey.

The bank also sought to preserve about $2 billion in capital annually by cutting its dividend to shareholders by 41 percent to 37.5 cents per share.

Chief executive Ken Thompson said the most painful decision was to cut the shareholder dividend but said doing so would be a long-term benefit as the company strengthens its balance sheet.

Also, Wachovia announced it will seek $7 billion in capital through sales of stock. Common and preferred shares will be sold at $3.5 billion for each. Adding more shares dilutes the value of current shareholders.

Wachovia stock fell $2.80, or 10.1 percent to $25.01 at 12:44 p.m. in New York.

Wachovia has suffered after buying a leading home loan lender two years ago. Its $24 billion purchase of California-based Golden West gave Wachovia access to the state's once booming housing market. However the downturn in that sector now has Wachovia anticipating future losses.

The firm said that it would set apart $2.83 billion for covering credit losses and insuring against future failed loans.