Junkyard Material

Citigroup shares fell to their lowest level in almost a decade after the head of Gulf investment agency, Dubai International Capital, said the largest US bank would need to raise "a lot more money" from outside investors.

Shares of Citigroup slumped almost 5pc to $22.05 yesterday on top of falls of more than 50pc in the past 12 months. They are now at their lowest level since November 1998.

Citigroup has been forced to write off billions of dollars of debts tied to sub-prime mortgages - a move which has prompted drastic efforts to rebuild its balance sheet.

Since November it has raised $30bn (£15.1bn) of capital from investment funds run by the states of Abu Dhabi, Kuwait and Saudi Prince Alwaleed bin Talal. But Sameer al-Ansari, chief executive of the investment agency owned by Dubai's ruler, said more would be necessary. "It's going to take more than that to rescue Citi and other financial institutions," he said.

DIC manages about $13bn of assets and has already bought stakes in HSBC and India's ICICI Bank.

Citigroup suffered a record $9.83bn fourth-quarter loss tied mainly to mortgage write-downs. Merrill Lynch is forecasting the bank may have to write off a further $15bn in its first-quarter results. Speculation is now mounting that the group will be forced to cut more than 30,000 jobs - about 10pc of its workforce - on top of the 4,200 job cuts announced in January.

As the economy falters and suffers the worst housing recession in a quarter of a century, US Federal Reserve chairman Ben Bernanke yesterday urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting. "Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done," Mr Bernanke said. "Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure."

Some estimate that almost a third of US mortgage-holders may be facing negative equity and Mr Bernanke said the housing crisis may get worse. "Delinquencies and foreclosures likely will continue to rise for a while longer," he said. A glut of homes for sale indicates "further declines in house prices are likely".

Lenders have been unwilling to adjust loan terms and are likely to resist a push for them to forgive more debt.

"Lenders tell us that they are reluctant to write down principal," Mr Bernanke said. "They say if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again." He said such moves would help by "reducing the risk of default and foreclosure".