Citigroup expects losses of 60%

2 October 2007

Banks are still facing the affects of the credit crunch after Citigroup, the largest bank in the US, yesterday warned that third-quarter income would be slashed by 60 per cent.

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.

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