SunTrust Cutting Dividend, Raising Capital

SunTrust Banks (STI) on Friday detailed plans to raise common equity and cut its dividend to meet capital needs identified by government stress tests and eventually pay back federal bailout funds.

SunTrust plans to issue common stock worth $1.25 billion through an "at-the-market" offering, it said. It also intends to cut its dividend by 9 cents to 1 cent a share.

The move, in addition to other capital initiatives, are part of SunTrust's plan to meet a $2.2 billion Tier 1 capital hole identified by the stress tests completed by the federal government earlier this month. The tests determined how much more capital the nation's 19 largest banks would need to withstand conditions if the economy continues to slide.

Sun Trust also said it has "several opportunities" to generate additional equity through the sale of securities and other assets. The sales would bring in roughly $300 million of Tier 1 common equity, the bank said.

Additionally, the company has more than $3.3 billion of preferred and hybrid securities outstanding and it may pursue private or public transactions to exchange the securities for common stock, it said.

"We are fortunate to have many ways to address the common buffer required under the government's 'more adverse' scenario," Chairman and CEO James M. Wells III said in a statement. "We also believe that these actions will enhance our ability to be in a position to repay TARP at the appropriate time and to actively pursue the opportunities that will come with a resumption of economic growth."