More US Banks Are Seeking Capital From Government

At least 10 more U.S. banks, including Capital One Financial, State Street and SunTrust Banks, joined the Treasury Department's $250 billion program to recapitalize the troubled sector and spur lending.

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Treasury Secretary Henry Paulson has agreed to provide the funds—in exchange for preferred stock and warrants—to a group of 20 to 22 lenders in a second round of financing.

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The 10 new lenders said Monday they would get a combined $17.6 billion in infusions. In a first round, the government had committed $125 billion to nine of the nation's largest banks.

"Investors should look at the infusions as a positive for those that participate," said Kevin Fitzsimmons, a banking analyst at Sandler O'Neill & Partners LP. "Over the next week, we may get a better idea of who is getting approved and who may not be. Perhaps there will be more scrutiny then of lenders we haven't yet heard from."

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The funds are part of the $700 billion Troubled Asset Relief Program that became law this month. Paulson hopes banks will use the funds to help unlock credit markets, rather than hoard the cash.

Some recipients may also use the funds to buy weakened rivals. On Friday, PNC Financial Services said it would buy the ailing Cleveland-based lender National City , with help from $7.7 billion from the government.

Lenders that announced infusions Monday include Capital One Financial , City National , Comerica, First Niagara Financial , Huntington Bancshares , KeyCorp , Northern Trust , State Street , SunTrust and UCBH . In announcing its $3.5 billion infusion, SunTrust also lowered its quarterly dividend 30 percent, four months after saying it planned to maintain the payout at 77 cents per share.

"Reducing the dividend is the responsible thing to do, given recent deterioration in the economy, the prospect of continued weakness in 2009, and the implications of this on the near-term outlook," Chief Executive James Wells said. The Treasury Department is letting banks announce infusions themselves, rather than release a list of recipients.

The release of a list might have scared investors worried that banks left off failed to qualify for help. A particular lender's silence as to whether it got an infusion might have the same effect.

Under the program, the Treasury Department will receive preferred shares that carry a 5 percent annual dividend for five years, and 9 percent thereafter. It may invest the equivalent of 1 percent to 3 percent of an individual lender's risk-weighted assets.

Participating banks agree to accept restrictions on executive pay, including golden parachutes.

Prior to Monday, First Horizon National , PNC, Regions Financial , Valley National and Washington Federal said they would receive government money under the program. On Sunday, Fifth Third Bancorp said it would apply for $3.4 billion.

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