Sharp said it has signed syndicated loan agreements with Mizuho and Mitsubishi UFJ for a 180 billion yen ($2.32 billion) term loan and a loan facility of an equal amount.

The two banks will invite other lenders to join a syndicate to spread the risk, with life insurer Resona Holdings likely to join, a banking source told Reuters on condition of anonymity. Many other financial institutions are cautious because of continued worries about Sharp's future.

The new lending will keep Sharp - which needs to repay as much as 360 billion yen of short term commercial loans over the coming months - in business, and could in turn give the banks a greater chance of recouping more than 300 billion yen in loans already extended to the embattled company.

An uncertain future for the display maker, however, means the lenders risk throwing good money after bad, analysts say.

"For the banks it's not good news," said Naoko Nemoto, managing director at ratings agency Standard & Poor's in Tokyo. "There are many uncertain things like (Sharp's) profit projections."

The banks' pressure on Sharp to adopt a low-risk business plan may scupper plans to make Taiwanese partner Hon Hai Precision Industry its largest shareholder.

Talks to seal the deal have been stalled since August and lenders may want Sharp to abandon the negotiation that would give fellow Apple Inc supplier Hon Hai, and its chairman Terry Gou, leverage to push the Japanese company into a riskier growth strategy.

That strategy would involve expanding its liquid crystal display business, an analyst at a brokerage in Tokyo said, declining to be identified because of the sensitivity of issue.

"For the next five years, Sharp belongs to the banks," the analyst said. That may mean more focus on stable, cash-generating businesses such as household appliances, he said.

To secure bank backing, Sharp, which makes air conditioners, microwave ovens and Aquos TVs, has had to agree to drastic cost cuts such as selling overseas TV assembly plants, possibly to Hon Hai, and shutting solar panel operations abroad.

The century-old firm, which made its start with ever-sharp mechanical pencils, expects to lose more than 100 billion yen this business year, sources say, as it struggles to compete against rivals including South Korea's Samsung Electronics.

($1 = 77.6950 Japanese yen)

(Reporting by Tim Kelly, Taigai Uranaka and Mayumi Negishi; Editing by Daniel Magnowski)

• A Permanent Economic Emergency