LOSSES from mortgage deals that turned sour are expected to cost Merrill Lynch $15 billion (£7.6 billion), almost double its original estimate, when the Wall Street bank reports earnings this week. The losses far exceed the $12 billion hit that many Wall Street analysts had forecast.

The bank is now reportedly seeking to raise $4 billion from investors in America, Asia and the Middle East to shore up its finances.

Citigroup, its rival and another big loser in the collapse of the credit markets, is believed to be wanting to raise $14 billion from foreign investors as its mortgage-related losses deepen. Citi has been in talks with cash-rich institutions such as the China Development Bank, which is prepared to invest $2 billion.

Merrill and Citi are in the process of cutting thousands of jobs and raising cash from disposals while the share values of both have fallen 45%- 50% in the past 12 months.

Merrill Lynch’s fourth-quarter charges, the largest in the New York bank’s 94-year history, follow $8.4 billion of writedowns from the third quarter that led to a $2.2 billion net loss and the ousting of its chief executive, Stanley O’Neal.

John Thain, O’Neal’s recently appointed successor, has moved quickly to address the bank’s financial woes. Soon after his arrival, Merrill Lynch sold a $5.6 billion stake to Temasek Holdings, which is controlled by the government of Singapore, and Davis Selected Advisers, an American-based money management firm.

Thain also said that Merrill is considering a sale of its stake in Bloomberg, the financial news and information company founded by New York’s mayor Michael Bloomberg. Brad Hintz, an analyst at Sanford Bernstein & Company, has valued the stake at about $4 billion.

In recent months, the Government of Singapore Investment Corporation has invested $9.7 billion in UBS; Citi has sold a $7.5 billion stake to the Abu Dhabi Investment Authority; and the China Investment Corporation has put $5 billion into Morgan Stanley. Wall Street analysts say more writedowns will come.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive