The offerings put pressure on financial shares, but underscore the improving conditions in the capital markets and the increasing demand for bank stocks, which have skyrocketed in the wake of the market's massive two-month rally.

Three banks that have received a clean bill of health from the government - US Bancorp, Capital One Financial Corp and BB&T Corp - said proceeds from their common stock offerings would go toward repayment of federal bailout funds received last fall, pending government approval.

Government scrutiny

Banks that received money under the US Treasury's TARP Capital Purchase Plan have become subject to increased government scrutiny, as well as limitations on executive pay.

A number of banks, including JPMorgan Chase and Company and American Express Company, have expressed their desire to return the funds as soon as possible.

"We believe that the TARP investment, philosophically, is not good for our company from a long-term point of view, because of the entanglements of how we run the business, including how we compensate our people," said BB&T president and Chief Executive Kelly King in an interview with The Associated Press.

"We believe long term that the political involvement in the lending process is not good."

KeyCorp shares fell 43 cents, or 6.2 per cent, to US$6.54, after the Cleveland-based bank said it will sell up to US$750 million of its common shares.

The bank must increase its capital levels by US$1.8 billion to satisfy the findings of the government's stress tests, the results of which were announced late last week.

The tests were designed to determine which of the nation's 19 largest banks might need more capital to cover rising loan losses if the economy worsened.

Ten banks, including Bank of America Corp and Citigroup Inc, must raise a total of US$75 billion in new capital as a backstop against possible future losses.

Sufficient capital

US Bancorp, Capital One and BB&T were among the nine banks deemed to have sufficient capital to withstand a deeper recession.

Minneapolis-based US Bancorp, which received a US$6.6 billion investment from the government, said it will sell US$2.5 billion of its common stock.

The bank may also offer medium-term notes. Its shares fell $1.29, or 6.3 per cent, to US$19.25 in afternoon trading Monday.

Virginia-based Capital One, which received US$3.55 billion from the government, announced plans to sell up to 64.4 million shares at US$27.75 a share for gross proceeds of US$1.79 billion.

The offering price is an 11.5 per cent discount to the stock's Friday closing price of US$31.34.

Shares dropped $3.52, or 11.2 per cent, to US$27.82.

Southeast regional bank BB&T said it would sell US$1.5 billion in common stock, and will also cut its dividend by 68 per cent to 15 cents to save US$725 million annually. The North Carolina-based bank received a US$3.1 billion investment from the government last fall.

BB&T shares fell $1.43, or 5.4 per cent, to US$24.90.

The original intent of the Troubled Asset Relief Programme was to boost lending and stimulate the economy after the collapse of investment firm Lehman Brothers Holdings Inc and the subsequent freezing up of the credit markets.

But King and others insist that lending is taking place and will continue to do so even once the funds are returned.