(Reuters) - Brokerage Friedman Billings Ramsey said U.S. government-sponsored enterprises (GSEs) would need to raise about $20 billion (9.8 billion pounds) each to reverse de-leveraging trend, while the banking system would need $200 billion to $250 billion.

Friedman said it saw the financial system currently under-capitalized by roughly $1 trillion to $1.2 trillion.

The brokerage, in a note on financial strategy, said financial equities will continue experiencing a downward pressure until fresh capital comes into the system.

Investors should avoid owning the current common equity in most financial institutions as future capital raises would dilute current common shareholder equity, the brokerage added.

More significant dividend cuts will be necessary for the industry to build capital, Friedman said.

The brokerage also said that the markets were not expected to return to normal until sometime in late 2009 or early 2010.

(Reporting by Ramya Dilip in Bangalore; Editing by Himani Sarkar)