CORRECTED - UPDATE 2-Royal Bank of Canada to offer C$2.3 bln in stock

(Corrects in paragraph 11 to show CIBC issue was for C$2.9 billion not C$2.75 billion) (Adds details on RBC's Tier 1 capital ratio, Scotiabank outlook)

By Lynne Olver

TORONTO, Dec 8 (Reuters) - Royal Bank of Canada (RY.TO) said on Monday it plans to issue up to C$2.3 billion ($1.8 billion) in common shares to beef up its regulatory capital ratio, in what would be the second-largest stock sale by a Canadian bank this year.

Royal Bank, Canada's largest bank, said after markets closed that it would issue 56.75 million common shares at C$35.25 each, for proceeds of C$2 billion. An over-allotment option to the underwriting syndicate could push the total to C$2.3 billion.

The offering is expected to close on Dec. 22.

RBC shares closed at C$37.50 on the Toronto Stock Exchange on Monday, up 3 percent.

RBC's Tier 1 ratio was 9.0 percent, or 9.1 percent including recent preferred share issues, and "it seems like the market wants more," said Ohad Lederer, an analyst at Veritas Investment Research in Toronto.

The RBC share issue could herald similar fund-raising by a couple of other banks, Lederer said.

RBC said its Tier 1 capital ratio would rise to 9.9 percent with the common share issue and recent preferred issues, or would rise to 10.1 percent if the underwriters exercise the over-allotment option.

The minimum Tier 1 capital ratio in Canada is 7 percent, but the big domestic banks currently range from 9.1 to 10.5 percent.

"Our capital position is strong and well above regulatory levels, and we are one of the world's most profitable financial institutions," Gord Nixon, RBC's president and CEO, said in a press release.

"However, the world has changed and we want to be conservatively capitalized."

Toronto-Dominion Bank (TD.TO) just issued C$1.4 billion of common shares in late November, and last January Canadian Imperial Bank of Commerce (CM.TO) raised C$2.9 billion, the largest Canadian common share issue done in 2008. Insurance company Manulife Financial (MFC.TO) announced a C$2.125 billion share issue last week to boost its capital levels.

Lederer said some RBC shareholders will likely be pleased that the bank is bolstering its capital base, but other shareholders will be unhappy with the dilution, coming on the heels of a profit decline in fiscal 2008.

"Not only are the earnings going down, but you're now spreading it out over a broader shareholder base," Lederer said. "I think 2009 is not off to a great start."

With investors seeking strong capital ratios, Lederer said that Bank of Nova Scotia (BNS.TO) and Toronto-Dominion Bank could be next to issue shares, Lederer said.