Fears of huge redundancies in the City mounted yesterday as Merrill Lynch announced 4,000 job losses worldwide, Citigroup signalled its intention to cut costs by up to 20 per cent and UBS prepared to eliminate about 900 positions in London.

As many as 400 jobs could go in Merrill's London operation as the brokerage reported a further $6.5 billion (£3.26 billion) hit from the credit crunch after what John Thain, its chief executive, called “as difficult a quarter as I've seen in 30 years on Wall Street”.

The Merrill redundancies were announced amid reports that UBS was preparing to axe about 900 investment banking staff in London next month, about 10 per cent of its workforce in the City. The job losses would be part of a wider cull, which is expected to exceed 2,000 redundancies worldwide. UBS is the biggest loser from the credit crunch, booking $37 billion of writedowns so far.

UBS and Merrill Lynch declined to comment on how many job losses would occur in London but UBS conceded that it would cut jobs.

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Vikram Pandit, Citigroup's chief executive, said that he planned to cut up to a fifth of the bank's $60 billion of annual operating expenses. Analysts expect Citigroup to cut about 25,000 of its 370,000 global workforce by the end of the year.

Mr Pandit's comments raised expectations that Citigroup could announce significant job losses in the City when it reveals its first-quarter results today. Analysts forecast that Citigroup would take a further writedown of about $11 billion from the credit crunch, leaving it with an overall group loss of $7 billion for the period.

The efforts of UBS, Merrill Lynch and Citigroup to cut costs by reducing staff emerged two days after JPMorgan Chase doubled to 40,000 its estimate for the number of redundancies it expected in the City as a result of the crisis. Merrill's job cuts will not affect its 16,400 brokers - the redundancies will fall among its remaining 49,000 staff in areas such as trading and capital markets. The group employs about 4,500 staff in London.

The bulk of the Merrill Lynch redundancies will be in the US and about 1,100 workers have already been culled. Merrill's latest writedown, for the first quarter, means the fallout from America's housing crisis has now cost the world's biggest brokerage $30.5 billion, as the value of its book of mortgage-backed securities and loans to finance private equity deals has plummeted.

It pushed the group to an overall net loss of $1.96 billion, or $2.19 a share, for the first quarter compared with a profit of $2.16 billion, or $2.26, a year earlier. Group revenue fell 69per cent to $2.9 billion for the period.

Mr Thain said that the brokerage remained “well-capitalised” despite the latest losses, in part because it had raised $12 billion from outside investors in recent months.

Citigroup is forecast to announced a further $11 billion of writedowns when it reports first-quarter results today. That would bring Citigroup's total credit crunch-related writedowns for the past three quarters to $29 billion.

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