According to City AM a profits warning was issued by Citigroup after it wrote off $1.4 billion in funded and unfunded leveraged loans.
Pre-tax losses on sub-prime mortgage-backed securities have also forced the bank to write off $1.3 billion which it had previously kept on its books, intending to repackage them as bonds.
Weak performance in the fixed-income credit market, loan write-offs and rising consumer credit costs are to blame for the expected losses, according to Citigroup chairman and chief executive, Charles Prince.
He said that the bank has a good success rate in fixed income trading but: "In September, this business performed at more normalised levels and we see this quarter's overall poor trading performance as an aberration."
Swiss banks UBS and Credit Suisse have also reported third-quarter losses as a result of the credit crisis.