Updated from Thursday, Nov. 20

Citigroup

(C) - Get Report

shares have been beaten to such a pulp lately that even a vote of confidence from its onetime savior may not be able to save the struggling banking titan.

Saudi Prince Alwaleed said Thursday he plans to increase his stake in Citi to 5%, and expressed support of the bank's management.

Prince Alwaleed, who currently holds less than a 4% stake, has been buying shares of Citi believing they are undervalued. The longtime Citi investor said in a press release that the New York-based bank has been taking necessary steps to improve its operations amid the ongoing credit crisis.

He is "fully confident" that Citi's universal banking model and global franchise will make it "a long term winner" in the financial services industry, the release said.

The stock fell 26% Thursday, its worst one-day percentage decline ever, as investors disregarded Prince Alwaleed's backing of the big bank.

Citigroup

officials have decided they need to consider a range of scenarios that were unthinkable only weeks ago, including selling all are parts of the bank,

The Wall Street Journal

reports on Friday.

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The stock has been so battered that Citi is reportedly lobbying federal officials to reinstate the short sale ban, the

Journal

reported.

Tim Ghriskey, the chief investment officer of Solaris Asset Management, says the run on Citi's stock price is panic by traders and not fundamentally based.

"There are very few real buyers out in the market, or sellers really," Ghriskey says. "We're down to just day traders moving money around and shorting anything with you-name-it exposures. And Citi's one of the favorite targets, because they have exposure everywhere. It's not a fundamentally based market. It's a market gripped by panic and, at least right now, we can't find a place to hide."

Solaris does not own any shares of Citi.

Prince Alwaleed initially invested in Citi's predecessor, Citicorp, in 1991, coming to its rescue after the bank made some losing bets on U.S. real estate and Latin America. The initial investment was less than $600 million. The investment has made Prince Alwaleed billions of dollars, but the value of his holdings has fallen sharply over the past year as Citi has been hit hard by the credit crisis.

The stake owned by Prince Alwaleed declined over the past year as Citi raised more than $50 billion in private capital and received $25 billion from the U.S. government under its bank investment program. Prince Alwaleed holds the stake in Citi through his investment company Kingdom Holding Co.

A Citi spokeswoman declined to comment regarding the Prince Alwaleed announcement. Ghriskey says with the markets acting as they are, even a splitting of Citi, something long fought for by several shareholders, may not really serve any beneficial purpose.

"

We've only begun to see some signs of economic weakness and there is certainly more to come," he says. "The problem is nobody knows how much. If there is a deep and dark recession, a lot of the bets are off on a lot of these financials. One would think Citi would be a survivor in all that, but who knows."

After failing to complete a deal to purchase

Wachovia

(WB) - Get Report

last month, the bank is setting its sights on smaller acquisitions and has had acquisition talks with Bethesda, Md.-based

Chevy Chase Bank

and

Valley National Bank

(VLY) - Get Report

. On Thursday

Reuters

reported that Citi is now one of several bidders for Chevy Chase Bank, along with

JPMorgan Chase

(JPM) - Get Report

and

Capital One

(COF) - Get Report

.

"Given the support from the various federal programs, we don't think Citigroup is on the verge of a Lehman-like implosion," writes Kathleen Shanley, a fixed income analyst at Gimme Credit. "But our optimism that the bank was poised to re-establish its credibility as a leading U.S. financial institution with the Wachovia deal was, alas, premature. We no longer see a near-term potential for Citigroup to outperform other major banks."

Shanley lowered her rating on the firm to underperform from a buy rating.

Citi has been battered over the past year and a half, having posted four consecutive quarterly losses. Citi lost $2.8 billion during the third quarter. Analysts widely expect it to post a fifth consecutive loss as well.

Deutsche Bank analyst Mike Mayo wrote in a note on Tuesday that he now expects the firm to post a loss for 2009.

"Citi is taking aggressive action out of necessity and still has to resolve many issues that have been around for a while," Mayo writes in a note.

Earlier this week,

Citi

said it plans to cut an additional 53,000 jobs on top of 22,000 cuts previously announced. The job cuts are part of a broader plan to reduce expenses in 2009.

Despite Citi's efforts to turn the company around, the vague details surrounding those initiatives may not be enough, some say.

In addition, rumblings have increased that a shake-up at the very top tier is necessary. Last week reports surfaced that board members were increasingly dissatisfied with the company's performance and considering whether to replace Chairman Sir Win Bischoff. Citi denied the speculation.

Frank Barkocy, the director of research at Mendon Capital Advisors, the fund manager to Burnham Financial Services Fund, says Pandit's unwillingness to offer a "definitive game plan" explaining the layoffs and acquisition efforts has hurt the company, already reeling from the pounding the financial sector is taking.

"Give us a sense of what are you looking for and how will this proposed acquisition fit in with game plans going forward," he says.

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