KeyCorp to repay TARP; plans $625 million offering

NEW YORK (Reuters) - Keycorp 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 plans to raise $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.

The Fed on Friday completed a second round of stress tests for the 19 largest U.S. banks. Keycorp was one of the three remaining banks among that group that had yet to repay its government bailout aid, received at the height of the financial crisis.

SunTrust Banks Inc, the largest U.S. lender in the TARP program, also said on Friday it would repay its $4.9 billion in bailout aid.

Keycorp also said on Friday the Fed had approved its plan to raise its quarterly dividend by 2 cents a share, to 3 cents, effective in the second quarter.

(Reporting by Maria Aspan; Editing by Lisa Von Ahn)