DAVOS-WRAPUP 2-Bankers, politicians warn of worsening crisis

By Thomas Atkins and Clara Ferreira-Marques

DAVOS, Switzerland, Jan 26 (Reuters) - World business leaders said on Saturday the worst might yet be to come in a financial crisis driven by continuing fears of bank losses and uncertainty over U.S. emergency stimulus measures.

"It's going to take some time for these things to work their way through the system," Citibank (C.N: Quote, Profile, Research) Chairman William Rhodes told Reuters in an interview. "In a nine-inning ballgame, I think we're in the fifth inning."

Bankers gathered in Davos hoped for the best but feared the worst in a week that saw the U.S. Federal Reserve make its biggest emergency interest rate cut in two decades.

Skies darkened further when French bank Societe Generale SOGN.VX revealed $7 billion in losses resulting from the biggest trading scandal in history, spreading gloom around the annual meeting of the World Economic Forum in the Swiss resort.

Bankers listed their ills in public discussions but admitted in private hallway chats that there were few cures for a financial system faced with hundreds of billions of dollars in investments which have turned bad.

"It will be a while before you see a return of normalcy in banking and markets," Merrill Lynch MER.N CEO John Thain said.

Troubles in the U.S. housing market were likely to worsen this year, with interest rate cuts and a hefty fiscal stimulus package unlikely to offset downside pressures, he said.

Thain told Reuters he was not worried about further losses at his own bank, which reported $16 billion in mortgage-related writedowns and adjustment this month.