Wells Fargo & Co. sold $10.65 billion in stock Tuesday, raising funds to help repay a $25 billion bailout received from the U.S. government last year.

Wells Fargo and Citigroup Inc. — which expects to raise $20 billion on Wednesday to help repay its bailout money — were the last of the largest banks to repay the funds, which were forced on banks amid the height of the financial crisis last year.

Wells Fargo's announcement on Monday it would repay the funds and raise capital came as something of a surprise, after Chief Executive John Stumpf and other executives at the San Francisco-based bank had repeatedly said the bank would repay funds in a shareholder-friendly manner.

"I think a lot of people expected them to earn their way out of TARP," said Keith Davis, analyst at Farr Miller & Washington.

The shares sold at $25 each, about 2 percent below Wells Fargo's closing share price of $25.49 on Monday. The offering dilutes shareholders by about 10 percent, according to analysts.

"It's a little more dilutive than people were expecting," said Davis.

The repayment will result in a charge of about $2 billion in the fourth quarter, according to the bank, but it will also cut its annual dividend expense by $1.25 billion.

Wells Fargo said on Monday it intends to raise up to $1.5 billion of equity through asset sales and it will sell about $1.35 billion to benefit plans instead of contributing cash to them. The bulk of the $25 billion in TARP money will be repaid with the bank's $14.6 billion in cash, analysts said.

Wells Fargo's capital raise followed that of Bank of America Corp, which repaid its money from the Troubled Asset Relief Program last week.

It comes as Citigroup, which also said on Monday it will repay its TARP funds, tries to place a large deal of its own which, at $20 billion, is almost twice the size of Wells Fargo's.

While the largest U.S. banks have now either returned, or are in the process of returning, their TARP money, regional banks including PNC Financial Services Group have yet to repay funds they received under the program.