CORRECTED - UPDATE 7-Many large banks repay US govt bailout funds

(Corrects number of banks in first bullet point, corrects
index closing level in third bullet point, updates total
repayment figure to $68 bln in bullet point and paragraph 1)

* Ten banks repay more than $68 billion in bailout funds

* Wednesday was first day to repay loans

* KBW Banks index ends down 3.3 percent
(Adds State Street repaying $2 billion, updates bank index to
market close)

By Elinor Comlay and Steve Eder

NEW YORK, June 17 Reuters) - Ten of the largest U.S. banks
said on Wednesday they repaid more than $68 billion of taxpayer
bailout funds, as they race to extract themselves from
government restrictions on pay for top executives.

Banks are returning money taken from the $700 billion
Troubled Asset Relief Program, which was once intended to spur
lending but is now viewed as a sign that recipients are too
weak to survive on their own. In most cases, the banks issued
preferred shares that carried 5 percent dividends in exchange
for the money.

JPMorgan Chase & Co (JPM.N) said it repaid $25 billion to
TARP, while Goldman Sachs Group Inc (GS.N) and Morgan Stanley
(MS.N) said they repaid $10 billion each.

Among other banks, U.S. Bancorp (USB.N) said it repaid $6.6
billion, Capital One Financial Corp (COF.N) $3.6 billion,
American Express Co (AXP.N) $3.4 billion, BB&T Corp (BBT.N)
$3.1 billion, Bank of New York Mellon Corp (BK.N) $3 billion,
State Street Corp (STT.N) $2 billion and Northern Trust Corp
(NTRS.O) $1.57 billion.

Apart from Northern Trust, all of these banks underwent
government "stress tests" of their ability to withstand a deep
recession and the government gave these 10 permission to repay
the funds last week.

Several of the banks that underwent the tests were ordered
to plug capital shortfalls, including Bank of America Corp
(BAC.N) and Citigroup Inc (C.N), which did not get a green
light to repay TARP.

Each took $45 billion from the program, and the government
is in the process of taking a potential 34 percent equity stake
in Citigroup. Bank of America has said it would like to start
returning government funds later this year.

BANKS TO BUY BACK WARRANTS

American Express, Bank of New York Mellon, BB&T,
JPMorgan, Northern Trust and U.S. Bancorp also intend to buy
back warrants for their common stock from the U.S. Treasury,
which they awarded when they took the bailout money.

The warrants give the Treasury the right for up to 10 years
to buy common stock in the banks at a set price. Banks can buy
back the warrants at "fair market value," the Treasury said.

BB&T is negotiating a buyback, a spokesman said. The other
banks did not comment on the status of buybacks or potential
terms.

As a condition of being allowed to repay, banks had to show
they could raise money from the private sector by selling stock
and issuing debt without the help of government guarantees.

The Federal Reserve also had to agree that their capital
levels were adequate to allow them to continue lending.

In connection with the early repayment and associated
dividends, several banks are taking second-quarter charges.
Goldman Sachs said it paid a dividend of $425 million, which
will reduce second-quarter earnings by about 77 cents a share,
while Morgan Stanley said it expects a $892 million charge in
the second quarter relating to the early repayment.

At least 22 smaller banks have been allowed to repay some
or all of their TARP money, although most must still negotiate
terms to buy back or extinguish their associated warrants.

Bank shares closed mostly lower on Wednesday, with the KBW
Banks Index .BKX down 3.29 percent.
(Reporting by Elinor Comlay, additional reporting by Steve
Eder; editing by John Wallace, Andre Grenon and Bernard Orr)