Jan. 10 (Bloomberg) -- Citigroup Inc. rose in New York trading after the Wall Street Journal reported that the biggest U.S. bank is seeking as much as $10 billion from foreign investors as mortgage-related losses deepen.

Merrill Lynch & Co., the largest brokerage, also is in talks with investors and may get $3 billion to $4 billion, the Journal said earlier today, without citing any sources. Citigroup has already received about $7.5 billion from Abu Dhabi and Merrill said last month that it's raising as much as $6.2 billion from Singapore's Temasek Holdings Pte. and New York-based money manager Davis Selected Advisors LP.

Banks and securities firms in the U.S. and Europe have turned to Asian and Middle Eastern governments for about $34 billion to prop up balance sheets battered by writedowns from the collapse of the U.S. subprime market. New York-based Citigroup and Merrill want to secure additional financing before they report the extent of their fourth-quarter losses next week, the Journal reported.

``The subprime situation has not been resolved and banks are looking to strengthen their capital in order to weather through this storm,'' said Arthur Lau, who helps manage $50 billion at JF Asset Management Ltd. in Hong Kong.

Citigroup gained 62 cents to $28.11 in composite trading on the New York Stock Exchange at 4 p.m., and Merrill advanced $1.55 to $52.03.

Spokesmen for Citigroup and Merrill declined to comment.

Subprime Writedowns

Citigroup may post $18.7 billion of fourth-quarter writedowns for mortgages and bad loans and cut its dividend by 40 percent, while Merrill may report $11.5 billion of writedowns, according to Goldman Sachs Group Inc. analyst William Tanona. Citigroup and Merrill lost almost 50 percent of their market value in the past 12 months and the companies replaced their chief executive officers.

Credit-default swaps on Citigroup have risen almost fivefold since July to 93 basis points, according to prices compiled by CMA Datavision. Contracts on Merrill rose fourfold in the same period to 160 basis points. Credit-default swaps, used to speculate on a company's ability to repay debt, rise as credit quality worsens. A basis point is 0.01 percentage point.

``When more investors or value investors are taking the opportunity to invest in U.S. banks, one may guess the situation could hopefully bottom out soon because they see value to invest at this level,'' Lau said.

Singapore Investment

State-controlled China Investment Corp. is buying an almost 10 percent stake in Morgan Stanley for $5 billion after the second-biggest U.S. securities firm reported a fourth-quarter loss of $9.4 billion from mortgage-related holdings. Zurich-based UBS AG and Bear Stearns Cos. also received sovereign money after bad investments depressed profits. Morgan Stanley and Bear Stearns are based in New York.

UBS, the biggest Swiss bank, replenished its capital last month with 13 billion Swiss francs ($11.6 billion) from the Government of Singapore Investment Corp. and an unidentified Middle Eastern investor by selling them bonds that convert into shares. Bear Stearns, the No. 5 U.S. securities firm by market value, moved to shore up investor support in October by selling a stake to China's government-controlled Citic Securities Co.

Citigroup may receive additional funds from Singapore's GIC, the Journal reported. GIC was an investor in Old Lane LP, the hedge fund company founded by Citigroup Chief Executive Officer Vikram Pandit. Jennifer Lewis, a spokeswoman for GIC, said the company can only comment on ``transactions that GIC has done.'' The Journal said the investments from overseas may attract scrutiny from U.S. lawmakers.

Dodd and SEC

New York Senator Charles Schumer supported Morgan Stanley's deal with China's sovereign wealth fund, when he said last month that the agreement strengthens ``one of New York's premier companies.'' Schumer, a Democrat, also issued a statement in November in support of Abu Dhabi's investment in Citigroup. The Abu Dhabi investors said they weren't interested in a governance role at Citigroup.

Senate Banking Committee Chairman Christopher Dodd, a Democrat from Connecticut, said last month that he was reserving judgment on China's investment in Morgan Stanley pending further study. Dodd also said he intends to determine whether the transaction must undergo review by the U.S. Committee on Foreign Investment. CFIUS, as the panel is known, examines whether acquisitions by overseas buyers compromise national security.

U.S. Securities and Exchange Commission Chairman Christopher Cox warned in December that the growth of state-run investment funds may trigger an increase in political corruption because governments might abuse the funds' leverage over markets and companies.

``When individuals with government power also possess enormous commercial power and exercise control over large amounts of investable assets, the risk of misuse'' increases ``markedly,'' Cox said during a Dec. 5 speech in Washington.

To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net.

Last Updated: January 10, 2008 16:19 EST