Mumbai: Citigroup, the largest US bank by market value, has reported a 60 per cent drop in third-quarter net income on the back of the turmoil in the subprime and leveraged loan markets and a general fall in consumer demand.

CEO Charles Prince attributed the decline to weak performance in fixed-income credit market activities, write-downs in leveraged loan commitments, and increases in consumer credit costs.

``Our expected third-quarter results are a clear disappointment,'''' Charles Prince said in the statement. ``We expect to return to a normal earnings environment in the fourth quarter,'''' he added.

Citigroup, based in New York, had to write down $1.4 billion in funded and unfunded leveraged loan commitments. It also said it was taking $1.3 billion in pretax losses on the value of subprime mortgage-backed securities it had warehoused to repackage into collateralised debt obligations, and leveraged loans it had planned to repackage into collateralised loan securities.

Citi''s losses are not restricted to leveraged loans and subprime loans alone. The bank said its consumer division also would see a $2.6 billion increase in credit costs.

A 60 per cent fall in Citigroup''s net income from last year''s third quarter would bring earnings to about $2.2 billion, the lowest in more than three years. The bank, which moved up its earnings report to October 15 from October 19, was expected to earn $5.6 billion, or $1.08 a share for the quarter, based on the average estimate, to analysts said.

The profit warning came after Swiss bank UBS AG, the world''s largest wealth manager, unveiled $3.4 billion in losses, threw out senior managers and cut jobs.