Wall Street banking shares crashed this afternoon, increasing speculation that the US government will be forced to take at least one of them into public ownership.

Citigroup tumbled 21% in early trading, partly because of a highly negative sell note from analysts at Bank of America.

Bank of America was also clobbered, the shares tumbling on concern that it faces even greater losses than feared from its takeover of Merrill Lynch. The fear is that Bank of America has overstretched itself with a number of deals. Gary Townsend of Hill Townsend Capital said: “Bank of America has all kinds of problems with its acquisitions.” Its shares were off 25%.

There is rising talk on Wall Street that Citigroup and Bank of America could be nationalised.

Tom Sownick of Clearbrook Financial said: “This looks, feels and smells like a repeat of Lehman. Investors are betting that the government needs to step in, and that will wipe out the equity holder.” Anton Schutz of Mendon Capital Advisers said: “Bank of America appears to be in meltdown.”

Earlier, JPMorgan had underlined its credentials as one of the great survivors of the credit crunch, as it announced that it still made a profit in the last quarter of 2008.

Chief executive Jamie Dimon unveiled fourth-quarter profits of $702 million (£482 million), beating analysts' expectations, but down 77% on the same period a year ago.

Full-year profits slumped 64% to $5.6 billion, down from 2007's record earnings of $15.6 billion. JPMorgan wrote off $3.58 billion in losses and investments in the fourth quarter, which Dimon described as “very disappointing”. He set aside $4.1 billion in reserves to cover possible further losses.

Despite the flagship investment banking division recording a $2.36 billion loss in the quarter, annual pay and bonuses totalled $7.701 billion for the 28,000-strong IB division, around $276,000 per employee, down only 11% on 2007.

Bonuses are understood to have been slashed by around 50% across the bank, with many staff receiving none this year. Dimon, who collected a $14.5 million bonus last year as part of his $27.7 million pay package, has signalled he won't accept a bonus.