Citigroup Inc. -- America's largest banking group -- warned Monday that it foresees a sharp fall of around 60 percent in third quarter profit due in part to failed mortgage investments.

Citigroup said its quarterly net profit would be much lower than the same period a year earlier because of losses tied to mortgage-backed securities and also due to a slowdown in big corporate mergers and acquisitions.

The banking giant's chairman and chief executive officer, Charles Prince, described the expected profit decline as a "clear disappointment," but voiced optimism that earnings growth would improve in future months.

Citigroup said rising costs in its consumer business and some trading losses would also drag down its quarterly profit which it is due to post on October 15.

"We see this quarter's overall poor trading performance as an aberration," Prince said.

"While we cannot predict market conditions or other unforeseeable events that may affect our businesses, we expect to return to a normal earnings environment in the fourth quarter," the Citigroup chief said.

Citigroup's share price was up a slight three cents at 46.70 dollars in morning trading amid wider stock market gains.

The major bank is not the only finance house suffering from soured mortgage-backed securities bets. Other banks have also endured heavy losses from such securities this year.

Citigroup had already disclosed mounting losses from mortgage-backed securities, which have been ravaged by the downturn in the US housing market, during the second quarter.

The financial colossus said in late July that rising net credit losses in the United States totalled 183 million dollars during the second quarter which it largely attributed to "higher delinquencies in second mortgages in consumer lending."

Citigroup's market worth of around 232 billion dollars, as well as its large overseas footprint, however, offers it better protection -- compared with smaller rivals -- from the distressed US mortgage market.

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