Four big U.S. banks on Monday announced plans to sell more than $6 billion of common stock, in an effort to raise capital and repay funds received under the government's bank bailout program.

U.S. Bancorp plans to sell $2.5 billion of stock, and is also selling $1 billion of debt. Capital One Financial Corp sold $1.55 billion of stock, while BB&T Corp is selling $1.5 billion and KeyCorp $750 million.

BB&T also reduced its quarterly dividend 68 percent to 15 cents per share from 47 cents, saving $725 million a year, following 37 straight years of dividend increases.

The offerings were announced three days after Wells Fargo & Co and Morgan Stanley sold a combined $12.6 billion of stock. Morgan Stanley also sold $4 billion of debt.

The banks were among 19 lenders to undergo government stress tests of their ability to weather a deep economic downturn.

U.S. Bancorp, Capital One and BB&T were among the nine found not to need more capital, while KeyCorp was ordered to raise $1.8 billion. Regulators last week ordered 10 lenders overall, including Wells Fargo and Morgan Stanley, to raise a combined $74.6 billion.

Banks are scurrying to raise capital after improved investor sentiment caused shares in the sector to more than double from their lows in early March, despite worsening credit conditions in housing, commercial loans and credit cards.

They're trying to get while the getting is good, said Walter Todd, who helps invest $650 million at Greenwood Capital Associates LLC in Greenwood, South Carolina. Fundamentals of banks appear not as bad they were, but they are still not good given the underlying conditions in the economy.

In morning trading, U.S. Bancorp shares fell 5.5 percent to $19.41; Capital One fell 11.4 percent to $27.77; BB&T fell 5 percent to $25.02, and KeyCorp fell 4.6 percent to $6.65.


U.S. Bancorp took $6.6 billion from the government's Troubled Asset Relief Program, while Capital One took $3.55 billion, BB&T $3.1 billion and KeyCorp $2.5 billion.

Hundreds of lenders took money from TARP, which was designed to spur lending and improve the economy.

Yet many now view TARP as an albatross that imposes too many restrictions, including on executive pay, and suggests that recipients are desperate for capital.

Rational, objective lending is one of the most important purposes of the banking system, and when you inject Congress and the administration into it, it effectively politicizes the process, which is not healthy, BB&T Chief Executive Kelly King said in an interview on Monday.

King also said the stress tests unnecessarily created huge levels of anxiety and concern among investors. Regulators have always had the ability to assess the capital of institutions, and require more if they chose, he said.

U.S. Bancorp is based in Minneapolis; Capital One in McLean, Virginia; BB&T in Winston-Salem, North Carolina, and KeyCorp in Cleveland.

Goldman Sachs & Co and Morgan Stanley are arranging the U.S. Bancorp offerings. Barclays Capital arranged the Capital One offering. Goldman Sachs, JPMorgan and Morgan Stanley are arranging the BB&T offering. Morgan Stanley is arranging the KeyCorp offering.

(Reporting by Jonathan Stempel; editing by John Wallace, Brian Moss, Dave Zimmerman)