NEW YORK/LONDON, Oct 1 (Reuters) Swiss banks UBS and Credit Suisse and America's Citigroup joined the ranks of casualties from a global credit crunch today, prompting money market rates to climb on fresh concern about the depth of the crisis.
Investors also got another reminder of the tight lending conditions, with US data management company Acxiom Corp announcing that its private-equity buyers had called off their proposed $2.25 billion acquisition.
In yet another sign that the credit rout was starting to spread to the broader world economy, global manufacturing growth fell sharply in September, a report showed.
But former U.S. Federal Reserve Chairman Alan Greenspan detected a glimmer of hope.
UBS unveiled $3.4 billion in losses, mainly on securities linked to the U.S. subprime mortgage sector, ousted senior managers and slashed jobs, while Credit Suisse said it would be ''adversely impacted'' by the market turmoil but would remain profitable in the third quarter.
Citigroup , the largest U.S. bank by market value, said it would post a decline of about 60 percent in third-quarter net income on turmoil in the subprime and leveraged loan markets as well as weakness in its consumer business.
''Today's news of UBS taking a 3.5 billion dollar hit will remind investors that not all the bad news is out. We expect well over 100 billion (dollars) of losses to be announced from now to mid October from the financial community here and abroad,'' said Andrew Brenner, markets analyst at MF Global in New York.
European credit spreads widened as the losses underlined concerns about tight credit markets after short-term lending rates jumped on Friday, dashing hopes from earlier last week that credit conditions were easing.
The earnings erosion at UBS, Credit Suisse and Citigroup contributed to a widening of short-dated U.S. interest rate swap spreads.
''It definitely fuels ongoing worries on the markets. Credit spreads are widening again and the interbank (lending) market remains very tense,'' said Valerie Plagnol, chief strategist at CM-CIC Securities in Paris.
London interbank offered rates for three-month euro deposits extended recent gains to a new six-year high.
In a speech at the Reuters headquarters in London, Greenspan said the market upheaval stemming from defaults on U.S. home loans to people with poor credit histories ''was an accident waiting to happen.'' But he noted that U.S. high-yield bond issuance had started to take off again. ''Is this August/September credit crisis about to be over? Possibly,'' he said.
CRISIS TO DOMINATE FED POLICY Bill Gross, manager of the world's largest bond fund PIMCO, however, warned that U.S. authorities were underestimating the vulnerabilities of the banking system and said the subprime mortgage crisis would dominate Fed policy ''over the next several years''.
Interest rate cuts might not lead to swift recovery of the housing sector, where prices have been declining for nearly 12 months, Gross said.
UBS, the world's largest wealth manager, said the 4 billion Swiss francs ($3.42 billion) write-down would result in a third-quarter loss of as much as 800 million Swiss francs ($683 million). [ID:nSP274382] Citi said it was taking $1.3 billion in pretax losses on the value of subprime mortgage-backed securities and leveraged loans and another $1.4 billion in pretax write-downs on funded and unfunded leveraged loan commitments.
Credit Suisse said its investment banking and asset management results had been hit but gave few further details.
The banking giants are only the latest in a string of global finance houses that have reported damage from a downturn in the U.S. housing market, which has triggered a global credit crunch.
Banks worldwide have clammed up on lending to each other as they strive to calculate exposure to soured loans, forcing the world's major central banks to inject emergency funds into the global financial system to prevent it grinding to a halt.
Sources familiar with the situation told Reuters last week Deutsche Bank profits could be hit by up to 1.7 billion euros ($2.4 billion) due to loans that have dwindled in value as a result of the credit market crisis. [ID:nL24402893] The interbank lending freeze has put the buyouts of student loan provider SLM Corp , or Sallie Mae, and of mortgage and vehicle fleet company PHH Corp in jeopardy.
But Sony Corp's <6758.T> financial arm successfully raised 348 billion yen ($3 billion) through an initial public offering on Monday after setting the price at the top end of an indicated range, despite jitters which had cast doubt on the flotation.
In stark contrast, shares in beleaguered British bank Northern Rock fell more than 17 percent on Monday after reports of a sharply discounted sale.
The Sunday Telegraph said the UK Treasury had given two U.S. hedge funds -- JC Flowers and Cerberus -- permission to start takeover talks, sparking fears of a fire sale of its assets that would leave shareholders with virtually nothing.
(additional Reporting by Jennifer Ablan, Jonathan Keehner and Yinka Adegoke in New York) Reuters MP VP0255