More pain on Wall Street as Wachovia set to raise $7bn

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Citigroup and Merrill Lynch are expected to unveil writedowns totalling as much as $17 billion on subprime-related loans and investments for their first quarters.

Wachovia, based in Charlotte, Carolina, shifted its first-quarter results announcement from this coming Friday to today. That prompted speculation that America's fifth-largest bank is putting the finishing touches to a share issue of between $6 billion and $7 billion.

Two years ago, Wachovia paid $24 billion for Californian mortgage bank Golden West which worked in one of the worst-hit housing markets in the US. Wachovia's shares have fallen almost 50% in the last year and it is likely that today's share issue will be at a discount even to the current depressed share price of $27.81.

Later this week, investors will be looking for reassurance from the two major investment banks that, even though they have made further huge write-offs during the last three months, the credit crunch has at least stabilised.

Citigroup is likely to report its second loss-making quarter in a row.

Analysts say its first-quarter writedown may be $10 billion on top of last year's $24 billion of write-downs. That would suggest a net loss of $5.7 billion for the quarter. Citi is likely to cut more than 25,000 of its 370,000 worldwide workforce.

Merrill Lynch's first-quarter writedowns could reach $7 billion, according to analysts, which would be added to last year's $22 billion of subprime losses. This would leave it nursing a first-quarter loss of around $520 million.