US public authorities agreed to provide embattled US banking and wealth management group Citi with $306 billion to deal with bad loans such as residential mortgages, as well as invest $20 billion in the bank.

The deal by the Federal Reserve, US Treasury and Federal Deposit Insurance Corporation, was announced yesterday. Citi executives had been discussing a merger or government bailout as two of the options for the bank's future following the loss in one day of trading on Friday of a quarter of the global bank’s market value.

Citi shares closed at their lowest level in 15 years to $3.77, but chief executive Vikram Pandit was reported to have assured the staff worldwide on a conference call that Citi would remain intact.

In the joint statement by the government agencies, it said that Citi will comply with restrictions on executive pay as part of the conditions of receiving public funds.

The announcement had been anticipated in press reports about a number of options being discussed by Citi on Friday and over the weekend.

The New York Times reported board members held a series of phone conversations with US Treasury Secretary Henry Paulson and New York Federal Reserve Bank President Timothy Geithner seeking new funding, citing unidentified people involved in the talks.

Analysts and investors also talked about possible merger partners including rival firms such as Goldman Sachs, Morgan Stanley, and Boston-based custodian,

State Street.

“All of these potential merger partners make sense: Goldman and Morgan Stanley are looking for more banking deposits in the

US, although they would have some overlap in investment banking and private clients,” said Aite Group senior analyst Alois Pirker.

“

State Street with management and custody would be a good fit,” he said.

“The question is, what would a deal for Citi be worth today? After Friday, Citi has a market value of around $20 billion, and is still likely to have exposure to some bad assets on its books,” Mr Pirker said.

Mr Pirker also threw HSBC into the mix as a potential merger partner that is looking to increase its

US banking presence.

Despite a week of share price decline that has lead to a reduction of around half of the market value of the global banking giant, the firm kept a united facade.

"Citi has a very strong capital and liquidity position and a unique global franchise…we believe the benefits will be seen over time,” spokesman Michael Hanretta said in a statement after the markets closed on Friday.

On Sunday evening Citi launched a new advertising campaign globally carrying the logo: “Providing strength – securing the future.”

Some within the company leadership believed the downward pressure on the share price this week is a result of actions by short sellers targeting the firm.

The Wall Street Journal reported Citi officials are lobbying lawmakers and the Securities and Exchange Commission to reinstate the agency's expired ban on short selling of financial stocks, citing people familiar with the matter.