European investment banks were yesterday forced to reveal the heavy damage inflicted on their profitability by the recent turmoil in financial markets.

Credit Suisse (CS) followed UBS with a profit warning yesterday but the moves prompted a sector share price rally on investor hopes that the disappointing trading statements could signal that the worst might be over for the banks by quantifying the extent of fallout from the turmoil.

UBS confirmed it would make sweeping management changes after it revealed it would post pretax losses of between SFr600 million and SFr800 million in the third quarter - its first quarterly loss in nine years.

The losses, driven by write-downs on holdings of US subprime residential mortgage backed securities, will lead to 1,500 job cuts expected to be concentrated on fixed income units in London and New York.

Huw Jenkins, who ran the investment banking business at UBS, is leaving the bank as part of the shake-up that also triggered the retirement of Clive Standish, the chief financial officer.

A spokeswoman for UBS declined to say how many people the company employs in Ireland, though its investment banking operation in Dublin is believed to be small.

Zurich-based CS said third-quarter net profits were likely to be SFr1.3 billion, plus or minus 20 per cent, against market expectations of about SFr1.6 billion.

The bank posted a net profit of SFr1.9 billion in the same period last year.

Chuck Prince's position as chairman and chief executive of Citigroup, meanwhile, looked vulnerable yesterday after the company revealed it suffered $6 billion of write-downs and losses in the third quarter following the recent turmoil in the credit markets.

The $1.4 billion of losses Citigroup has recorded on commitments to lend to private equity buy-outs is particularly awkward for Mr Prince, who said that Citigroup was "still dancing" in the credit markets, shortly before investor demand for leveraged loans collapsed.

The remark infuriated some top Citigroup executives, who at the time were trying to persuade bankers to take on less risk.

Citigroup employs 2,000 people at its operations in Dublin and Waterford.

Mr Prince said the expected 60 per cent fall in third-quarter earnings was a clear disappointment.

He also revealed that the performance of Citigroup's markets and banking business was "below expectations, even taking into account turbulent market conditions". - ( Financial Times service)