CORRECTION (OFFICIAL)-UPDATE 1- SunTrust losses moderating

(Corrects loan loss reserve expectations, line 31)

* Expects Q3 loan loss provisions to mirror Q2

* CEO calls TARP money "unwanted, excess funding"

* Will raise capital through earnings, not stock offers

* Unlikely to buy more failed banks

* Shares slightly lower

NEW YORK, Sept 15 (Reuters) - SunTrust Banks Inc (STI.N) will repay its $4.9 billion government bailout as soon as regulators allow and its credit problems stabilize, CEO James Wells said on Tuesday.

Wells, speaking at the Barclays Global Financial Services Conference in New York, said the bank will not raise capital through a stock offering to repay the money borrowed under the Troubled Asset Relief Program. Instead, the bank will build capital through its earnings, he said.

Wells compared the bailout funds to "very expensive debt."

"I think anybody in their right mind would want to do something with debt this expensive," he added. The bank pays an 8 percent dividend rate on the preferred shares it sold to the U.S. government.

Wells said that before allowing the bank to repay the funds, he expects regulators will first need to see the bank's loan losses are well below the levels assumed in a May "stress test."

The stress test projected SunTrust's loan losses could reach $11.8 billion under a worst-case scenario for 2009 and 2010.

Wells said the bank's credit problems have begun to stabilize, and he expects third-quarter loan loss reserve growth to decline or stabilize. The bank reported a $2.9 billion loan loss reserve in second quarter that grew 5.3 percent from first quarter.

Wells said the bank is unlikely to be a player in bidding for failed banks withing its geographic footprint, calling them "relatively undesirable." SunTrust has been involved in three FDIC-assisted bank deals since last fall.

SunTrust shares were off 3 cents to $22.10 in morning trading on the New York Stock Exchange. (Reporting by Joe Rauch; editing by John Wallace)