Citigroup suffered two further blows to its reputation yesterday as a key analyst forecast that the bank faced a further $18 billion (£9 billion) of writedowns and the head of a major sovereign wealth fund predicted that it would need “a lot more money” from outside investors to stay afloat.

Guy Moszkowski, an analyst at Merrill Lynch, revised his first-quarter forecast for Citigroup dramatically to a $1.66-a-share loss from a $0.55-a-share profit as he predicted that the bank would be forced to take further multibillion-dollar writedowns.

Citigroup, which in January reported a $9.8 billion fourth-quarter loss and cut its dividend by 41 per cent after taking an $18 billion writedown, is likely to record another $15 billion of losses on the roughly $37 billion of remaining exposure to sub-prime mortgages this quarter. In addition, Mr Moszkowski expects $3 billion of writedowns on loans made to finance leveraged buyouts and other lending over the same period. He blamed his profits downgrade on “continued deterioration in US residential and commercial mortgage markets, corporate debt markets and key investment banking categories”.

Citigroup’s mounting writedowns led to the departure of Chuck Prince as chief executive and a $7.5 billion cash injection from the Abu Dhabi Government, both in November, as the bank sought to boost its capital base in the wake of its heavy losses. In January Citigroup received a further $14.5 billion injection from governments such as Singapore and Kuwait.

However, with concern mounting about Citigroup’s remaining exposure to high risk assets such as bonds backed by sub-prime mortgages, Sameer al-Ansari, the head of Dubai International Capital, yesterday gave warning that the bank still needed more money to maintain its capital base at an acceptable level.

“It will take a lot more than that [the previous cash infusions] to rescue Citi and other financial institutions,” he told a private equity conference in Dubai. He did not say whether Dubai International would seek to invest in Citigroup should it embark on a further round of fundraising. Sovereign wealth funds such as his are flush with cash and in recent weeks have pursued major Wall Street firms keenly as they look to invest more of their capital in shares of overseas companies. Sovereign wealth funds have invested an estimated $105 billion in banks such as Merrill Lynch, Morgan Stanley, Bear Stearns and UBS.

Such funds control about $3,200 billion of assets between them and this number is expected to grow to about $12,000 billion by 2015.

Although the US Government is desperate for the funds’ money, which Wall Street badly needs to keep afloat, politicians are also concerned that some countries may use their investments to gain political clout. As a result, there may come a point at which they seek to prevent the funds from making further significant investments in key American companies. Dubai International is controlled by the country’s Government.

The double whammy of bad news sent Citigroup’s shares down by $1.74, or 7.5 per cent, to $21.34 in midday trading, their lowest for more than nine years. The shares later recovered slightly to finish at $22.10. Wall Street wobbled, too, falling more than 200 points at one stage before ending the day 45.10 points down at 12,213.80. The decline in Citigroup’s shares followed a 54 per cent dive in the share price over the past 12 months.

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