March 18, 2011 / 4:56 PM / 9 years ago

UPDATE 2-KeyCorp to repay TARP; prices $625 mln offering

* KeyCorp makes stock offering to repay $2.5 bln in TARP

* KeyCorp, SunTrust among last big US lenders to exit TARP

* Fed approves KeyCorp’s 2 cent dividend hike (Adds offering pricing)

NEW YORK, March 18 (Reuters) - KeyCorp (KEY.N) said on Friday that it planned to repay $2.5 billion in U.S. government bailout funds, becoming one of the latest banks to shake off the lingering effects of the financial crisis.

The Cleveland-based bank raised $625 million through a common stock offering, which it will use to exit the U.S. Troubled Asset Relief Program. It also plans to start a separate senior debt offering.

On Friday, the Federal Reserve completed a second round of stress tests for the 19 largest U.S. banks. KeyCorp was one of the three banks in that group that had yet to repay government bailout funds.

SunTrust Banks Inc (STI.N), the largest U.S. lender in the TARP program, also said on Friday that it would repay its $4.9 billion in bailout aid. SunTrust also priced its offering on Friday evening, raising $1.04 billion at $29.50 a share. [ID:nN18299598]

KeyCorp said on Friday that the Federal Reserve had approved its plan to raise its quarterly dividend by 2 cents a share to 3 cents, effective in the second quarter.

KeyCorp shares closed up 0.8 percent at $8.92. The offering of 70.6 million shares priced at $8.85 per share. (Reporting by Maria Aspan; Editing by Lisa Von Ahn)

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