Dec. 9 (Bloomberg) -- SunTrust Banks Inc. fell 11 percent after disclosing plans to sell an additional $1.4 billion of preferred shares in the U.S. Treasury’s Capital Purchase Program, saying the economic outlook has gotten worse.

The bank had sold $3.5 billion in preferred stock as part of the U.S. financial-industry rescued plan, the Atlanta-based company said in a statement. SunTrust also sold $2.75 billion of two- and three-year bonds backed by the Federal Deposit Insurance Corp., joining Bank of America Corp. and American Express Co. in issuing debt today.

“The economic situation is decidedly bleaker than was the case when we announced our initial, partial regulatory capital transaction under the Treasury program,” said James M. Wells III, SunTrust’s chief executive officer, in the statement. “We have concluded that further augmenting our capital at this point is a prudent step, especially if the current recession proves to be longer and more severe than previously expected.”

Wells has been cutting costs by as much as $500 million a year and restricting lending to cover increasing defaults on loans to home builders and residential developers. The bank is shedding its stake in Coca-Cola Co., held since 1919, and in October cut its quarterly dividend 30 percent, to 54 cents a share, to help replenish capital.

SunTrust declined $3.72 to $30.04 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 57 percent this year.

SunTrust’s sales of bonds was split between $2 billion of 3 percent notes due in November 2011 and $750 million of floating- rate notes due in December 2010.

To contact the reporter on this story: David Mildenberg in New York at dmildenberg@bloomberg.net

Last Updated: December 9, 2008 17:29 EST