Citigroup Inc. will probably get rescued by the U.S. government after a crisis in confidence erased half of the bank’s stock-market value in three days, investors and analysts said yesterday.

Citigroup has more than $2 trillion of assets, dwarfing companies such as American International Group Inc., which got U.S. support this year. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke may favor a rescue to avoid the chaotic aftermath of Lehman Brothers Holdings Inc.’s bankruptcy in September.

With a market value of $274 billion at the end of 2006, Citigroup was the biggest U.S. bank. Now, at about $21 billion, it’s number-five behind Minneapolis-based U.S. Bancorp.

“There is no question that Citi is in the category of too big to fail,” said Michael Holland, chairman and founder of Holland & Co. in New York, which oversees $4 billion in investments. “There is a commitment from this administration and the next to do what it takes to save Citi.”

While Citigroup executives say the company has adequate capital and liquidity to ride out the crisis, its tumbling share price may shake the confidence of creditors, clients and rating agencies. A similar scenario played out at Lehman, when chief executive officer Richard Fuld declared that the firm was on the right track five days before the firm went bankrupt.

The market may be implying some sort of regulatory intervention, Jason Goldberg, a former Lehman analyst who now works at Barclays Capital in New York, wrote in a note to clients. In situations where the government has stepped in, the equity holders have not fared well.

Citigroup CEO Vikram Pandit told employees yesterday that he doesn’t plan to break up the company, aiming to reassure workers as the stock fell. Citigroup’s board, led by chairman Win Bischoff and independent director Richard Parsons, were also scheduled to meet at the bank’s headquarters in New York yesterday, said a person familiar with the company’s plans who declined to be identified because the deliberations are private. Its shares dropped 94 cents, or 20 percent, to $3.77 on the day.

Investors were fearful that the government might orchestrate a takeover of Citigroup over the weekend that could wipe out common shareholders, said Paul Miller, a Friedman Billings Ramsey banking analyst.

Earlier this week, Pandit, 51, announced a plan to cut costs by shedding 52,000 jobs, and billionaire Saudi investor Prince Alwaleed bin Talal increased his stake in the company. Neither assuaged shareholders’ concern that bad loans and securities writedowns may extend a year-long run of net losses totaling $20 billion.

“To be consistent with the last few government interventions, I don’t think Citigroup’s going to be allowed to fail,” said William Fitzpatrick, an analyst at Optique Capital Management Inc. in Milwaukee, which oversees about $1 billion and doesn’t own Citigroup shares. “This company’s too intertwined with the rest of the financial system to allow any further deterioration.”

Citigroup spokesman Michael Hanretta declined to comment. On the call yesterday with employees, Pandit said the company’s capital and liquidity are strong.

Including a $25-billion capital injection from the U.S. Treasury under the $700-billion Troubled Asset Relief Program, the company has at least $50 billion of capital above the amount required by regulators to qualify as well capitalized. Capital is the cushion banks must keep to absorb losses and protect depositors.

“With Citi being as big as they are, the government will make a special case and step in and find another reason to dispose of more TARP funds,” said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati, which manages about $2.9 billion and doesn’t own Citigroup stock or debt.

Pandit was appointed last December to succeed Charles O. Prince, who was ousted as mortgage-bond writedowns saddled the bank with a record fourth-quarter loss of almost $10 billion. Prince was the handpicked successor of former chairman and CEO Sanford Weill, who built the company through a series of acquisitions over 17 years before stepping down in 2003.

People familiar with CEO Pandit’s call yesterday morning with senior managers, who spoke anonymously because the comments during the call were not made public, said his message was similar to that at his town hall meeting with employees on Monday — that Citigroup has adequate capital, and that he supports the universal bank model for Citigroup, including arms such as Smith Barney.

On Monday, Pandit said the universal banking model is “the right model,” and that Citigroup’s strategy is “to be the world’s truly global universal bank.”

Still, one person said, “It’s clear everything is on the table. That wasn’t explicit, but I think it’s clear.”

An outright sale shouldn’t be ruled out, but it appears unlikely, said Alois Pirker, an analyst at financial services research firm Aite Group. Not only are there few potential buyers right now, but “firms prefer to cherry pick,” he said. “If you don’t have a well integrated shop, the benefit of taking over the whole versus pieces diminishes.”

Pirker said sale opportunities include Citi’s Global Transaction Services business and its brokerage, Smith Barney. Pandit has said that these two businesses are important to Citigroup — but these two franchises are not core to retail banking and would be attractive to potential buyers, Pirker said, because they have performed well in the recent turbulent environment.

Selling off the businesses in a particular region is another option, Pirker said. Recently, Citigroup sold off its retail banking business in Germany — it could do the same with Japan, for example, he said.

Citigroup could also consider a merger rather than an outright sale.

“A merger is indeed a possibility at this point,” Fitzpatrick said. He said there are a number of firms that would be eager to take over some of Citigroup’s businesses — particularly a company such as Goldman Sachs Group Inc., an investment bank that recently turned into a bank holding company and is now on the prowl for deposits.

The subprime residential mortgage crisis has swelled into a full-blown debt crisis for not just Citigroup, but other banks as well, leading to defaults in everything from leveraged loans to credit-card debt to commercial real estate loans.

Even JPMorgan Chase, one of the nation’s stronger large banks, is shedding about 10 percent of its investment bank staff to better navigate the tough climate.

On Monday, Citigroup’s Pandit said the company’s consumer portfolio losses could rise between $1 billion and $2 billion each quarter through mid-2009. With Citigroup reporting net credit losses of $4.9 billion during the 2008 third quarter, the forecast means losses could swell to more than $10 billion by the middle of next year.

Pandit also said at the time that Citigroup plans to move $80 billion worth of marked-down assets on its balance sheet into a held for investment, held to maturity or available for sale category — instead of listing them on their trading portfolio. Pandit said the accounting change “allows us to benefit from the inherent upside from these marked-down assets,” but some investors saw the move as a tactic to hide bad assets, Fitzpatrick said.

Citi is “a great franchise, but it’s damaged right now,” Fitzpatrick said. “No one knows what the ultimate losses are going to be on a $2 trillion balance sheet.”

With Associated Press reports