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Stressed banks to start selling shares

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Three companies have announced plans to sell shares in order to repay government bailout funds, after stress tests showed the institutions had enough capital to sustain themselves in a worsened economy without additional aid, Bloomberg reported.

Capital One Financial Corp., U.S. Bancorp and BB&T Corp. were among the 19 banks that were examined as part of the federal government’s “stress test,” which found 10 lenders needed to raise a total of $74.6 billion in capital.

Capital One said it would sell 56 million shares of common stock, U.S. Bancorp plans to sell a total of $2.5 billion in stock and BB&T has begun a public offering of $1.5 billion of common stock.

Both U.S. Bancorp, which must repay $6.6 billion in Troubled Asset Relief Program (TARP) funds, and BB&T, which received $3.1 billion, emphasized they wanted to repay the government as quickly as possible.

“We firmly believe this action is in the long-term best interests of our shareholders and our company because of the risk and uncertainty associated with being a TARP participant,” BB&T CEO Kelly King said in a statement.

Additionally, KeyCorp, which was told it needed $1.8 billion in capital as a result of the stress test, said it plans to sell as much as $750 million in common shares. Wells Fargo & Co., which was told it needed to boost its capital by $13.7 billion, said it raised $8.6 billion in capital as a result of selling shares last week.

Morgan Stanley also raised $8 billion by selling stock and debt last week. The stress test indicated it would need $1.8 billion in additional capital to buffer against future losses.

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