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Citigroup, Merrill Are in Talks For More Foreign Capital

Charles Gasparino
Thursday, 10 Jan 2008 | 7:16 AM ET

Citigroup and Merrill Lynch are in discussions to receive more capital from investors, primarily foreign governments, as both prepare to announce significant writedowns next week, CNBC has learned.

Citigroup is expected to announce as much as $24 billion in writedowns, while Merrill Lynch could announce around $11 billion.

Oliver Quillia for cnbc.com

Citigroup could get as much as $10 billion in capital injections, likely all from foreign governments, while Merrill is expected to get $3 billion to $4 billion, much of it from a Middle Eastern government investment fund, the Wall Street Journal said.

Citigroup's board is expected to discuss cutting the firm's dividend in half, a move that could save it more than $5 billion a year, the paper also reported.

Representatives of the two banks were not immediately available for comment.

U.S. banks have been wrestling with huge subprime mortgage losses, prompting some to seek cash from sovereign wealth funds.

In December, Merrill Lynch increased its capital base by as much as $7.5 billion after selling a stake to a Singapore government investment fund and an asset manager. Morgan Stanley has said it would receive $5 billion from China after recording $9.4 billion of writedowns.

Citigroup in November agreed to sell up to a 4.9 percent stake to Abu Dhabi for $7.5 billion, while UBS accepted a $9.75 billion investment from a separate Singapore state fund.

-- Reported by Charles Gasparino, Written by CNBC.com

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