By Jennifer Ablan

Gross said in an interview that he continues to hold the "high-quality" debt of banking companies because they represent good long-term value.

Gross, chief investment officer at Pacific Investment Management Co, or PIMCO, told Reuters that, in addition to Citigroup, he remains a holder of the debt of Morgan Stanley , Goldman Sachs Group Inc , Deutsche Bank , and Spain's Banco Santander .

Gross -- who manages the $130 billion PIMCO Total Return Fund -- joins other big bond managers, including Dan Fuss, vice chairman of Boston-based Loomis Sayles, in buying and holding on to the corporate credits of major investment banks.

Recently, Fuss, who helps oversee more than $100 billion in fixed-income securities, had been purchasing the debt and convertible preferred securities of Lehman Brothers .

Many banks have raised capital and cut their dividends as the housing and credit market crises deepen further than many investors expected. Since last year, exposure by financial institutions globally to subprime mortgage debt and structured finance products has resulted in more than $400 billion of write-downs and losses.

The deleveraging process will continue to be painful, Gross said.

"The financial system is deleveraging, which noticeably affects financials, but ultimately reflects negatively on our entire economy since it is finance- and consumption-oriented," he said.

The Philadelphia KBW Bank Index <.BKX> of 24 large banks dropped to its lowest since October 2002 on Wednesday, weighed down by sharp losses among regional banks, many of which are being forced to cut their dividends and raise capital.

Export-driven sectors are "holding up the rest of the market," Gross said. But he quickly added that export-driven economies are vulnerable if developing economies continue to tighten policies by way of higher interest rates and currency revaluations.

"Oil, of course, is not helping matters," he added.

(Reporting by Jennifer Ablan in New York; Editing by Jonathan Oatis)