KeyCorp to Raise $1.5 Billion, Loan and Tax Provision (Update1): “KeyCorp, Ohio's third-largest bank, said today it will be forced to raise $1.5 billion after losing a tax case tied to leasing.

KeyCorp expects a $1.1 billion to $1.2 billion second- quarter charge related to the case and plans to cut its dividend by 50 percent to save about $200 million a year, the Cleveland- based company said in a regulatory filing. The bank will record a higher tax provision in future periods “until the dispute is fully resolved,” KeyCorp said in the filing.

KeyCorp said it was raising its loan loss reserves by about $600 million in the second quarter and said charge-offs for the year would be between $750 million and $1 billion. The lender said it would raise the fresh capital through a combination of common shares and convertible preferred stock.

The case, decided by a federal court in Ohio, involved leasing deals in tax years from 1999 to 2003, and will apply to later years, KeyCorp said in an earlier regulatory filing.”

KeyCorp (KEY) was in a Rising Bear Wedge that resolved itself beautifully… This was then followed up by a Runaway Gap. With this kind of momentum, expect KEY to continue to burrow lower… and quickly… followed by a slow death for the bank is likely.

The broader S&P 500 has formed just as perfect a Rising Bear Wedge that I’ve been yapping about. I got a little excited and called the break DOWN and OUT in Cracks in Bear Wedge. But the breakout finally did come in Bear Wedge Breaks, Goldman, Lehman, Merril, Morgan: Cut To SELL.