* Registers to issue about 600 bln yen in shares-sources
* Shares plunge 16 pct ahead of announcement on media reports
* Resona to buy back up to 900 bln yen pref shares from state
* Resona owes about 1.7 trln yen in public funds
* Offering roughly equal to Resona's market capitalisation (Recasts with announcement)
By Taro Fuse and Emi Emoto
SINGAPORE/TOKYO, Nov 5 (Reuters) - Resona Holdings said it would raise about $7.4 billion in the Japanese bank's first public stock offering since it was effectively nationalised in 2003 as it accelerates efforts to repay taxpayer funds.
Resona's shares tumbled 16 percent ahead of the announcement after Reuters initially reported the impending share sale.
The slide marked the stock's biggest one-day fall in more than seven years, slicing $1.5 billion off its market value in heavy trade.
Japan's fourth-largest bank registered with regulators to sell 600 billion yen ($7.4 billion) worth of new shares and said it would use the proceeds along with retained earnings to buy back 900 billion yen of preferred shares owned by the government.
Sources had told Reuters the share sale was expected to be about 500 billion yen.
The move will put a sizeable dent in the 1.7 trillion yen Resona still owes taxpayers from bailouts in the late 1990s and the government's takeover of the bank in 2003, after it nearly collapsed under a mountain of bad loans.
Resona has hired Merrill Lynch Japan Securities and Nomura Securities to underwrite the share offering, which is roughly equal to the bank's current market capitalisation.
Earlier this year Resona bought back about 400 billion yen worth of its preferred shares from the government, marking steady progress in its efforts to repay its debt to taxpayers, which at its peak was more than 3 trillion yen.
Resona's fundraising differs from that of its bigger rivals in that the lender is not tapping the market to meet stricter capital regulations, since the new global rules will not apply to domestically operating banks like Resona.
Japan's top three banks -- Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group -- have recently embarked on big capital raisings in anticipation of the new Basel III rules.
Prior to the announcement, Resona shares slid 16.3 percent, or by their daily limit of 100 yen, to 512 yen. Volume jumped to 24 million shares, more than four times the average over the past 90 days. ($1=80.75 Yen) (Additional reporting by Taiga Uranaka and Noriyuki Hirata; Writing by Nathan Layne; Editing by Chris Gallagher and Lincoln Feast)