The Kuwait Investment Authority (KIA) is emerging as a linchpin in plans by Merrill Lynch and Citigroup to raise about $19 billion (£9.7 billion) to help shore up their balance sheets.

Merrill Lynch is expected to reveal further writedowns of between $10 billion and $20 billion tomorrow related to its exposure to sub-prime lending.

The embattled Wall Street bank, which installed John Thain as its new chief executive before Christmas, is however in talks to raise up to $4 billion of fresh capital, with the KIA understood to be one of the big investors in the latest consortium.

The Middle East sovereign wealth fund is reportedly also prepared to invest up to $3 billion of the $15 billion of new investment Citigroup wants to raise under Vikram Pandit, its newly installed chief executive.

Background

• Citi and Merrill pin hopes on sovereign cash

• Abu Dhabi group pays $60m for restaurants

• Chinese fund invests $20bn to widen scope of domestic bank

• Old captains bow to the new kings

Major sovereign wealth funds in Asia and the Gulf

• World order is changing as old captains bow to the new kings

• The welcome mat must be rolled out for novel investors

Multimedia

• Big deals from the East

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Chinese state-backed investment funds or banks are expected to stump up collectively another $9 billion for Citigroup, which ousted Chuck Prince as its chief executive late last year after having to take multibillion-dollar writedowns on its balance sheet.

The remainder is expected to come from public market investors.

Last month Merrill agreed deals to raise up to $5.2 billion from Temasek, the Singapore government-owned fund, and $1.2 billion from Davis Selected Advisors, the US asset manager.

In November the Abu Dhabi Investment Authority, the investment arm of Abu Dhabi, injected $7.5 billion into Citigroup, in return for a 4.9 per cent stake. Last month China Investment Corproration, agreed to inject $5 billion into Morgan Stanley in return for a 9.9 per cent stake.

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