June 2 (Bloomberg) -- JPMorgan Chase & Co. led finance companies raising at least $8.7 billion after the Federal Reserve imposed additional capital requirements on firms seeking to repay U.S. rescue funds.

JPMorgan, the second-largest U.S. bank by assets, sold $5 billion of common stock, and Morgan Stanley, the sixth-biggest bank, sold $2.2 billion, according to data compiled by Bloomberg. KeyCorp, Ohio’s No. 2 bank, completed a $1 billion sale, while American Express Co., the top U.S. credit-card company, sold $500 million.

JPMorgan and American Express, which got aid from the Troubled Asset Relief Program, were among nine of 19 firms subjected to stress tests that were deemed to have no need for more capital. The stock sales help the companies comply with a rule that they show they can tap equity investors. Morgan Stanley, which last month raised $4.57 billion after regulators said it needed $1.8 billion, was told to raise more.

“This is just making it more costly to leave TARP, which may discourage some of the lesser players from stretching to try to leave TARP,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. The government is saying “we need to make sure that in a dynamic world you can continue to raise capital.”

None of the companies have yet won approval to repay U.S. rescue funds. JPMorgan Chief Executive Officer Jamie Dimon said on a conference call yesterday he would be “very surprised” if the bank isn’t able to refund the government in full by the end of this month. Morgan Stanley said it also expects its share sale to enable the bank to repay TARP by the end of June.

Pricing Details

JPMorgan sold 142 million shares for $35.25 each, 2.4 percent less than yesterday’s closing price, according to Bloomberg data. Morgan Stanley’s 80.2 million shares were priced at $27.44, or 8.2 percent below yesterday’s close on the New York Stock Exchange. American Express sold 19.8 million shares at $25.25, compared with $25.99 yesterday. KeyCorp’s deal was for 205.4 million shares issued at an average price of $4.87.

JPMorgan fell 4.5 percent to $34.50 in composite trading at 4:07 p.m., Morgan Stanley rose 0.7 percent to $30.09 and American Express declined 4.9 percent to $24.71. KeyCorp, based in Cleveland, rose 8 cents to $4.82.

Morgan Stanley said China Investment Corp. agreed to buy 44.7 million of its new shares and Mitsubishi UFJ Financial Group Inc. agreed to buy 16 million.

Dimon, 53, who called the TARP money “a scarlet letter” and “the TARP baby” in April, made it clear that he was ready to get out from underneath government control.

‘Dear Timmy’

“Dear Timmy, we are happy to be able to pay back the $25 billion you lent us,” Dimon read yesterday from a mock letter to U.S. Treasury Secretary Timothy Geithner at the 31st Annual NYU International Hospitality Industry Investment Conference. “We hope you enjoyed the experience as much as we did.”

The government received warrants -- the right to buy shares at a set amount -- with almost all capital injections made from TARP. The total value of the warrants is about $5 billion, according to Treasury calculations.

Dimon said on the call that repaying the U.S. should lift the bank from under government restrictions. He didn’t know how the firm would resolve warrants sold to Treasury, and said he hoped to settle them “sooner rather than later.” The U.S. should cancel 50 percent “out of fairness,” Dimon said.

JPMorgan, Goldman Sachs Group Inc. and Morgan Stanley have applied to refund a combined $45 billion of government investments, a step that would mark the biggest reimbursement to taxpayers since the $700 billion bank bailout program began in October.

American Express

American Express will use money raised in its stock sale to partially repurchase $3.4 billion of preferred shares from the government. The company issued the shares to the Treasury’s Capital Purchase Program, which is part of the TARP rescue plan.

“We’ve always viewed the Capital Purchase Program as a temporary program,” American Express Chief Executive Officer Kenneth I.Chenault said in a statement yesterday.

An announcement on the “initial set” of redemption approvals will come during the week of June 8, the Fed said.

Bank of America Corp., the biggest U.S. bank by assets, said today it has raised almost $33 billion toward the $33.9 billion capital buffer the Fed said it needed to raise after the stress tests. It said it expects to “comfortably” exceed the capital target.

Bank of America spokesman Scott Silvestri had no immediate comment on whether regulators have asked the Charlotte, North Carolina-based lender to raise additional equity beyond the $33.9 billion goal.

Goldman Sachs, which wants to return the $10 billion it received from TARP, raised HK$14.8 billion ($1.91 billion) by selling shares of Industrial & Commercial Bank of China Ltd. after the stock jumped 29 percent in two months.

SunTrust Banks Inc. gained 16 percent to $15.94 after Morgan Keegan & Co. upgraded the lender to “outperform.” Concern over dilution is “now in the rear view mirror” after the bank said it would raise $1.4 billion through a common stock offering at $13, analyst Robert Patten of Morgan Keegan said in a report today.

To contact the reporters on this story: Elizabeth Hester in New York at ehester@bloomberg.net; To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

Last Updated: June 2, 2009 16:25 EDT