Oct. 23 (Bloomberg) -- SunTrust Banks Inc., Georgia's largest lender, posted a 26 percent decline in third-quarter profit and said it may sell a stake to the U.S. government.

Net income available to common shareholders was $307.3 million, or 88 cents a share, compared with $412.6 million, or $1.18, a year earlier, the Atlanta-based company said today in a statement. Earnings beat the 58-cents-a-share average estimate of nine analysts surveyed by Bloomberg.

SunTrust said it will apply to sell $1.6 billion to $4.9 billion in preferred shares to the U.S. Treasury, joining regional lenders including KeyCorp and Regions Financial Corp. that want to participate in the $250 billion program to recapitalize banks. The world's biggest financial firms have recorded losses of $657 billion tied to the global credit crunch and raised $640 billion to replenish capital.

``We are in a position of strength and we do not have a deep need for this capital,'' Chief Executive Officer James Wells said during a conference call today. ``However, given the level of economic uncertainty, it may be prudent to pursue this option, particularly since the preferred stock is attractively priced.''

SunTrust set aside $503.7 million for soured loans, more than double the $147 million set aside in the same period a year ago. Nonperforming loans increased to 2.6 percent of the total as of Sept. 30, from 2.09 percent on June 30. Revenue rose 21 percent to $2.46 billion.

`Adequate Capital'

Wells has been cutting costs by $500 million a year and reining in lending to cover rising defaults on loans to home builders and residential developers. The bank has also announced plans to shed its stake in Coca-Cola Co. to help replenish capital.

``SunTrust has adequate capital and should manage to earn its way through the ongoing credit cycle,'' Morgan Keegan & Co. analyst Robert Patten said in an Oct. 8 note.

SunTrust fell $1.50 to $40.13 yesterday in New York Stock Exchange composite trading.

To contact the reporter on this story: Doug Alexander in New York at dalexander3@bloomberg.net

Last Updated: October 23, 2008 08:44 EDT