NEW YORK (Bloomberg) — Citigroup Inc. shareholders, cheered by a $5.1 billion first-quarter loss that wasn't as big as some analysts forecast, face growing concern that the bank may have to sell assets, reduce the dividend and attract outside investment to bolster capital.

Citigroup's so-called Tier 1 capital ratio — a measure of its ability to withstand loan losses — fell to 7.7 percent at the end of March, the New York-based bank said yesterday. Citigroup says it needs a 7.5-percent ratio to provide a margin of safety and preserve its credit ratings.

The bank's shares surged 4.5 percent yesterday after it reported $16 billion of asset write-downs during the quarter, less than some observers predicted. The write-downs burned through much of the $30 billion of capital Citigroup has raised since late last year, leaving it vulnerable to further charges and loan-loss provisions. "We're in a recession, they have a huge consumer book, and there's huge double-digit-billion provisions that they're going to have to take in the next 18 months to two years," CreditSights Inc. analyst David Hendler said. "They're undercapitalised for their risk."

A weakening US economy and rising consumer delinquencies have forced chief executive officer Vikram Pandit and chief financial officer Gary Crittenden to back away from assurances earlier this year that the bank didn't need to raise more capital. In January, Crittenden said Citigroup "stress-tested" its assumptions under "multiple recessionary scenarios".

Asked yesterday if the bank might seek an additional infusion, Crittenden said: "You can never say never."

"This is a difficult business environment," Crittenden said on a conference call with analysts and investors. "There are no easy solutions here, no silver bullets."

Citigroup raised capital in December and January by selling stakes to investment funds controlled by foreign governments including Abu Dhabi, Singapore and Kuwait. The infusions helped boost Citigroup's Tier 1 ratio to 8.8 percent by January 22 from 7.1 percent at the end of the year.