UPDATE 1-Synovus affiliate sells business for $70.5 mln

* Says affiliate sells merchant services business

* Says Sale to Merchant e-Solutions Inc

* Sees $70 mln gain, future rev from sale

* Says may sell more assets

April 2 (Reuters) - Loss-making lender Synovus Financial Corp (SNV.N) said one of its affiliates sold its merchant services business to Merchant e-Solutions Inc for $70.5 million in cash.

The sale, expected to generate about $70 million pretax gain and addition to capital, also paves the way for the bank to get future revenue through a referral agreement, the company said.

The Columbus, Georgia-based bank also said it will continue to look at additional strategic initiatives to bolster its capital position, including possible sale of more assets.

Synovus, which has about $35 billion in assets, holds many commercial real estate and construction loans in some of the worst markets in the country, making credit quality a major concern and raising questions about whether the bank will need to raise more capital.

Despite the company's repeated assurances about its capital levels, and expectations of posting a profit in 2010, investors and analysts are still concerned about the Southeast bank's future.

Synovus shares, which have recovered significantly since hitting a 52-week low of $1.45 in November, closed up 1.5 percent at $3.34 Thursday on the New York Stock Exchange. (Reporting by Anurag Kotoky in Bangalore; Editing by Gopakumar Warrier)