Financial Winners & Losers: Citigroup

Updated from 12:23 p.m. ET

Financial firms were mostly falling along with the major averages Wednesday, as reports of increased scrutiny for Citigroup (C) and Morgan Stanley's (MS) fourth-quarter loss contributed to investor unease.

The KBW Bank Index closed down 1.6% at 44.98, and the Amex Securities Broker/Dealer Index gained 0.25% to 77.12.

After dipping $1.33 in early trading, Morgan Stanley shares were off their lows, then closed up 37 cents, or 2.3%, at $16.50. The bank holding company announced a loss of $2.37 billion, or $2.34 for the fourth quarter. A year ago, Morgan Stanley lost $3.61 billion, or $3.61 a share.

Meanwhile, Citigroup, a member of the Dow Jones Industrial Average, was falling 4.9% to $7.83.

The Wall Street Journal reported Wednesday that the banking behemoth was facing additional regulatory scrutiny in part because of its participation in the government's Troubled Asset Relief Program.

Elsewhere, a report in the Financial Times suggested that Citi would be merging its investment and corporate banking operations.

On the winning side, Goldman Sachs (GS) added 3.7% to $78.78, building on the previous day's gains despite announcing its first loss as a public company on Tuesday.

Among regional banks, shares of Colonial Bancgroup (CNB) gained 2.3% to $2.25, Regions Financial (RF) rose 0.8% to $8.77 and shares of Zions Bancorp (ZION) fell 2.44% to $26.39.

JPMorgan Chase analyst Steven Alexopoulous noted that those three banks were most at risk for needing equity in the months ahead.

On the other hand, Alexopoulous noted People's United Financial (PBCT) and City National (CYN) had the highest equity levels among midcap banks.

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