Fears that Citigroup would need a huge new capital injection intensified yesterday as a public show of support for the group’s management by Prince Alwaleed bin Talal with a pledge to boost his stake to 5 per cent failed to prevent a big fall in its share price.

The shares fell more than a quarter to a 13-year low in New York after losing nearly a quarter of their value the previous day. They closed last night down $1.70, or 26 per cent, at $4.70.

Citigroup is expected to need up to $100 billion (£67.5 billion) in the next 18 months from another government bailout. Prince Alwaleed, the Saudi Arabian billionaire, is Citigroup’s largest individual shareholder with a stake of just under 4 per cent. He pledged his support for the bank, saying he “strongly believes” that the stock is “dramatically undervalued” after falling nearly 80 per cent this year.

However, Sean Egan, of the Egan Jones ratings agency, said: “There is no question that Citigroup will need to raise fresh capital. It is just a question of timing, amount and source.” He said Citigroup would need to raise between $50 billion and $100 billion in the next 18 months to cover the further investment losses that he expected it to suffer. “Citigroup is too big to fail. But it will not be able to raise that kind of money from the private sector so it will have to come from the Government.”

Peter Kenny, managing director of Knight Equity Markets, said that the proposed share acquisition amounted to not very much. “The fact he’s bumping up to 5 per cent actually underscores how pathetic the stock market performance has been,” he said.

Citigroup, the world’s biggest financial services group until February this year, saw its market capitalisation fall to less than $30 billion yesterday, about 10 per cent of its value in 2006, before the housing crisis began. It is now only the fifth-biggest bank in America after being overtaken this week by US Bancorp, a Midwestern bank. Industrial & Commercial Bank of China is the world’s biggest bank by market capitalisation; Bank of America is the largest in the US.

In a further sign of the pessimism surrounding the banking industry, shares in Goldman Sachs yesterday fell below their $53 flotation price for the first time since the group went public in 1999, before closing at $52. Investors are concerned that the bank, which set a record for a Wall Street company last year, could report the first quarterly loss since its flotation in the fourth quarter of this year.

Citigroup has raised about $50 billion of capital from sovereign wealth funds and $25 billion from the US Government in the past year. On Monday, it announced that it would cut 52,000 jobs, double the number previously indicated, to help to reduce costs. Those cuts will come on top of the 23,000 that it has shed in the past nine months as the fallout from the housing crisis continued to take its toll.

The Prince said these measures would help to make Citigroup “a long-term winner in financial services” and that it was “taking all necessary steps to position the company to withstand the challenges facing the banking industry”. He gave complete support in the Citigroup management, led by Vikram Pandit, chief executive.

Citigroup’s shares fell 23 per cent on Wednesday after it bought the last $17.4 billion in assets held by its structured investment vehicles, independent debt-financed entities, that the bank runs and is responsible for. The group said it would take a $1.1 billion writedown on the eroded values of the assets it owned, such as collateralised debt obligations, or pools of bonds.

— JPMorgan cuts

JPMorgan Chase is cutting 10 per cent of its investment banking staff, or about 3,000 jobs, sources close to the bank said. Shares in JPMorgan closed down 17.9 per cent, or $5.09, at $23.38. Analysts said that the cuts could reflect greater than expected weakness at the bank, which has weathered the financial storm better than many of its rivals. JPMorgan declined to comment.

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