Citigroup, Inc. and Merrill Lynch & Co., U.S. banks which have seen heavy losses due to bad bets on the mortgage market, are in discussions to get up to $10 billion and $4 billion in capital respectively primarily from foreign governments, according to a report on Wednesday.
Much of Merrill's funds would come from a Middle Eastern government while Citi would get most of its funds from governments in the Middle East and Asia, the Wall Street Journal said.
The companies are trying to finalize details of the plans before reporting earnings next week which are expected to contain combined losses of as much as $25 billion related to investments in the U.S. housing market, the report stated. Citigroup may report up to $15 billion in mortgage-related losses on Tuesday, the Journal said.
Both banks have recently changed their leadership in an effort to set a new directions for the firm. Vikram Pandit, a former Morgan Stanley executive who came to Citi over the summer, replaced resigning CEO Charles Prince last month. Earlier in December, John Thain, the former CEO of the New York Stock Exchange replaced embattled Merrill Lynch chief Stan O'Neal.
Abu Dhabi invested $7.5 billion in Citigroup in November, claiming a 4.9 percent stake in the bank. Merrill Lynch received a $5.6 billion infusion from Singapore-owned investment group Temasek Holdings.
According to the report, Citi may seek funds through Government of Singapore Investment Corp., or GIC.