A SINGAPORE sovereign wealth fund that bought large stakes in banks UBS AG and Citigroup Inc warned yesterday that the worst of the US financial crisis may not be over even if Washington implements a US$700 billion bailout plan.

The Government of Singapore Investment Corporation, or GIC, said the current turmoil in the US banking system will likely undermine the future earnings of the fund, which manages more than US$100 billion.

"The proposal put forth by the US Treasury should stabilize the markets to some extent," said GIC Deputy Chairman and Executive Director Tony Tan at a news conference.

"But we should not assume the worst is over. Financial markets and the economic situation have deteriorated significantly in the last five months."

GIC also regretted the timing of its investment in the two banks - US$9.75 billion in UBS in December and US$6.9 billion in Citigroup in January - said Chief Investment Officer Ng Kok Song.

"We would have liked the timing of the investments to be better," Ng said. "But these are long-term investments."

"We were surprised by the onset and magnitude of the market turmoil starting in July 2007," Ng said. "What seemed like a contained problem of delinquencies in US sub-prime mortgages quickly spread to other segments of the credit markets."

GIC, which began investing Singapore's reserves in 1981, said its annual profit for the last 20 years averaged 7.8 percent in US dollar terms. Tan refused to say what the fund's earnings were last year or specify how much it manages.

"Given the present challenging conditions and the problems in the world economy, it is unrealistic to expect that we will achieve such high returns," Tan said.

Singapore's other sovereign wealth fund, Temasek Holdings, said last month that the company's earnings doubled to US$12.8 billion.