LONDON--The outlook for Lehman Brothers Holdings Inc darkened further on Thursday as a newspaper reported that an intended asset sale had collapsed and a Citigroup analyst forecast big losses for the group.

The fourth-largest U.S. investment bank has taken a $7 billion hit from credit-related writedowns and losses since the start of the global crisis and is forecast to write down more.

Lehman is concerned its capital cushion is not enough to absorb losses, and people close to the matter said this week it is considering selling at least a part of its asset management business.

The Financial Times said Lehman's talks with China's biggest brokerage, CITIC Securities and state-owned Korea Development Bank (KDB) on a sale of up to half its shares had failed, fuelling speculation about the U.S. bank's efforts to raise more capital.

CITIC told Reuters it had held no formal talks about buying a stake in Lehman, while Lehman and KDB spokespeople declined to comment.

A KDB official, who declined to be identified, said the South Korean bank was scaling back its overseas assets and staff to reduce exposure to volatile foreign markets.

The note by Citi analyst Prashant Bhatia added weight to a forecast by JPMorgan Securities on Tuesday that Lehman will take a further $4 billion in writedowns tied to losses from mortgage-related investments.

Bhatia cut his third-quarter outlook for Lehman, Goldman Sachs and Morgan Stanley and said the U.S. investment banks might incur further writedowns, mainly on their mortgage assets, with Lehman forecast to suffer the biggest hit at $2.9 billion.

The analyst widened his third-quarter loss estimate for Lehman to $3.25 a share from 41 cents a share.

However, Bhatia said he saw a "lower probability" Lehman would sell its Neuberger Berman asset management business or raise capital in the near term.

"Even under the potentially more stringent rating-agency guidelines related to the amount of preferred securities in the capital mix, we anticipate that Lehman can absorb over $3 billion of after-tax losses without adding more common equity," he said.

At 1222 GMT in Frankfurt, Lehman shares were trading down 0.1% at 8.95 euros. The stock closed Wednesday in New York at $13.73, valuing the bank around $9 billion.

The shares have plunged more than 80% since early 2007.

The Wall Street Journal said the U.S. Federal Reserve acted on rumours last month and called Credit Suisse Group to see whether it had pulled a credit line from the bank.

Credit Suisse told Federal Reserve officials that it had no intention of pulling the line of credit, the paper cited people familiar with the matter as saying.

Fed officials contacted Credit Suisse last month, but it is unclear whether the move occurred before or after the U.S. Securities and Exchange Commission subpoenaed dozens of hedge funds and financial firms about four Lehman-related rumours, the paper said.

Lehman Brothers and Credit Suisse spokespeople in London declined to comment.