Citigroup's ( C) dismal results , while fully expected, skewered the bank's shares on Tuesday and sent a shockwave through both the financial sector and the broader market.

The troubled banking behemoth, ravaged by its exposure to subprime mortgages, wrote down a pretax sum of $18.1 billion and took a fourth-quarter loss of $9.83 billion, or $1.99 a share. That reverses last year's profit of $5.13 billion, or $1.03 a share, and it compares with Wall Street targets for a loss of $1.03 a share, per Thomson Financial. Revenue plummeted 69.7% to $7.22 billion, also thanks to the massive subprime writedowns.

In light of all this -- and also as expected -- Citi chopped its dividend down by 41% to 32 cents a share and stretched its hand out for mostly foreign-sourced funds. Of the $12.5 billion that the bank is now getting from the sale of convertible preferred stock, $6.88 billion will come from the Government of Singapore Investment Co. The rest will derive from Saudi Prince Alwaleed bin Talal, the Kuwait Investment Authority and a number of domestic investors, including former Citi CEO Sandy Weill and the New Jersey Division of Investment.

New York-based Citi also launched an offering of about $2 billion for newly minted convertible preferred shares, for which it "already has substantial commitments," as well a further offering for nonconvertible preferred stock.

Citi shares were recently sliding $2.26, or 7.8%, to $26.80, in sharp retreat from the upward float they had enjoyed over the past week. That helped clobber the NYSE Financial Sector Index, which was plummeting 249.56 points, or 3.2%, to 7,678.34.

Merrill Lynch ( MER) also inflicted some pain on the sector tracker, losing 3.5% to $54.03, after likewise saying it will get a big cash injection from mostly overseas investors. The battered New York brokerage agreed to issue $6.6 billion in convertible preferred stock primarily to Korean Investment Co., Kuwait Investment Authority and Japan's Mizuho Corporate Bank. Some domestic investors will also participate. Merrill emphasized that none of the buyers will have any control or governance rights.

Back in earnings, Boston bank State Street ( STT) said fourth-quarter income sank 27.8% year over year to $223 million, 57 cents a share. As previously disclosed , that's primarily because the Boston bank set aside 71 cents a share for covering potential legal costs related to losses from its mortgage-backed investments. Even excluding that one-off expense, however, the bank still came in 7 cents shy of the $1.35 per-share analyst consensus. Shares surrendered 6.1% to $79.70 in recent trading.

Marshall & Ilsley ( MI), meanwhile, slipped 2.9% to $24.17 after swinging to a continuing-operations loss of $24.5 million, or 9 cents a share, in the fourth quarter. That excludes a huge one-time gain from spinning off its Metavante Technologies ( MV) subsidiary in November, which vaulted its total bottom line to $439.9 million, or $1.83 a share. Analysts were looking for EPS of 19 cents before special items. A year ago, the Milwaukee bank earned 62 cents a share.

And San Francisco's Wells Fargo ( WFC) shed 4.5% to $26.94 on a Friedman Billings downgrade to underperform. The analyst cited concerns on Wells' large exposure to consumer credit -- around 60% of its loans -- given "recent indications of greater-than-anticipated deterioration" in mortgages, auto loans, and the credit card business. Friedman sliced a nickel off Wells' fourth-quarter earnings estimate to 35 cents a share, ratcheted down 2008 earnings expectations and cut its price target to $23.

Also catching the sickness was U.S. Bancorp ( USB) which spent much of the day down even though fourth-quarter income held up fairly well. Stripping out 13 cents worth of items, including the bank's share of a settlement from an antitrust lawsuit against Visa, earnings stayed flat with last year at a better-than-expected 66 cents a share. Analysts had sought 59 cents. U.S. Bancorp shares were recently trading near the flat line.

The KBW Bank Index, crushed under all of the above save for Merrill, was plunging 3.2% to 81.5.

Elsewhere, Moneygram International ( MGI) took one of the day's biggest price dives -- some 50% -- after saying its portfolio of asset-backed securities had incurred another $571 million in losses from the end of September through the end of November. That brings total unrealized investment losses to $860 million, said the Minneapolis transaction processor. The company also took a loss of $200 million in selling $1.3 billion in securities, doubling the unrealized losses it had taken on those securities as of Nov. 30.

Accordingly, the company is now in "exclusive" capital infusion talks with a group led by Thomas H. Lee Partners. If the deal goes through, Moneygram is currently expected to sell $750 million to $850 million in equity to the consortium, along with $550 million to $750 million in debt. This would be contingent on the company liquidating a "significant portion" of its investments, an action from which Moneygram anticipates yet more losses. Shares were lately plummeting $5.88 to $6.29.

Among the few financial winners today was Ocwen Financial ( OCN), which rocketed by more than half after a buyer group led by CEO William Erbey offered to take it private for $7 a share. The group is also being led by Oaktree Capital Management and Angelo, Gordon & Co., and Erbey plans on allowing the bank's senior management to get in on the deal, as well. If and when the takeout goes through, Erbey intends to stay on as chairman and CEO. Shares of the Florida bank were flying $2.18 higher at $6.16.