SunTrust Banks Inc. said Monday it has received preliminary approval from the Treasury Department for a $3.5 billion investment under the government's capital purchase program.
The bank said it plans to use the capital to expand lending and other business capabilities, and may also explore potential acquisitions.
"Our participation in the Capital Purchase Program enhances SunTrust's already solid capital position and will permit us to further expand our business and take advantage of growth opportunities," James M. Wells III, chairman, president and chief executive, said in a statement.
The investment will be made in the form of a sale of preferred stock and related warrants to the Treasury, SunTrust said.
As part of its $700 billion financial rescue package passed last month, the government is pouring $125 billion through stock purchases into nine large financial companies. Another $125 billion is being made available to other banks. Several financial institutions, including Capital One Financial Corp. and Fifth Third Bancorp, have announced plans to participate.
Separately, SunTrust said it will reduce its quarterly dividend by 30 percent to 54 cents. The bank last paid a dividend of 77 cents at the end of August.
SunTrust shares dropped $2.11, or 6 percent, to $33 in premarket activity. The stock has ranged from $25.60 to $73.80 over the past year.