Crisis bites Citigroup and Swiss banks

By Andrew Hurst and Christian Plumb

ZURICH/NEW YORK (Reuters) - The credit crisis struck at the heart of global finance on Monday as Swiss bank UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz) said it faced a shocking loss in the third quarter and Citigroup (C.N: Quote, Profile, Research, Stock Buzz) warned its profits were in a steep slide.

UBS's chief domestic rival Credit Suisse Group (CSGN.VX: Quote, Profile, Research, Stock Buzz) also said its third quarter results would be "adversely impacted" by the credit market turmoil, but said it would remain profitable in the third quarter.

The announcements are the latest from a lengthening queue of banks that have taken hits from the meltdown in U.S. subprime mortgages, which has set off a global liquidity crisis.

UBS said it would write down a net 4 billion Swiss francs ($3.4 billion) in its fixed-income portfolio and elsewhere, resulting in a third-quarter loss of 600 million francs to 800 million francs, its first quarterly loss in nine years.

UBS also said it would shed 1,500 jobs in its investment bank -- a sharp reversal of its recent buildup.

Citigroup, the world's largest bank by market value, said it was expecting a fall of about 60 percent in third-quarter earnings on $5.9 billion in losses and write-downs from subprime and leveraged loans, fixed income trading, as well as weakness in its consumer business.

Among the main culprits for the profit warning were $1.4 billion in pretax write-downs on funded and unfunded leveraged loan commitments.

Citi also said it was taking $1.3 billion in pretax losses on the value of subprime mortgage-backed securities it had "warehoused" -- held temporarily on its books -- to repackage into bonds called collateralized debt obligations (CDOs).