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Citigroup 3Q Profit Rises, But Revenue And Trading Fall

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NEW YORK — Citigroup Inc., one of the worst-hit banks during the financial crisis, posted its third straight quarterly profit in a sign that major banks and their customers are starting to find their footing.

Citi became the second major bank this quarter, after JPMorgan Chase & Co., to report a profit by dipping into funds it had set aside to cover future losses from bad loans. The move showcases confidence from the banks that their customers will continue to make payments on credit cards, mortgage debt and other kinds of loans.

The New York bank, which is still 12 percent owned by the government, earned $2.15 billion, or 7 cents per share, in the three months ending in September. The results beat analysts' expectations by a penny. The profit came after the bank took back $1.97 billion it had previously set aside for bad loans. During the same period last year, the bank posted a loss of $3.24 billion, or 27 cents per share. Citi's stock rose 5.6 percent, lifting shares of other banks along with it.

"We believe we have put in place all the elements for continued profitability," Citi's CEO Vikram Pandit said on a conference call with analysts.

Despite the improvement in Citi's bottom line, the bank still posted a decline in revenues as new borrowings shrank. That suggested that though banks have stabilized, they haven't turned a corner yet. Citi posted revenues of $20.74 billion, down 2 percent from the same quarter last year and 6 percent below the second quarter.

"There aren't that many profitable opportunities for banks to go out and lend, and it will likely remain that way until the economy picks up," says Jeff LaFrance, a bank analyst at Gradient Analytics.

Citi's confidence in its customers stems from five consecutive quarters of improvement in its default trends. Losses from bad loans fell 30 percent during the quarter to $7.66 billion as defaults in Citi's retail partner cards, Citi-branded credit cards and real estate portfolios all fell.

So far, Citi has managed to steer clear from the ongoing foreclosure mess that has ensnared other major U.S. banks. Rivals Bank of America Corp. and JPMorgan have stopped most or all their foreclosures because of evidence that thousands of foreclosures were handled improperly.

"We continuously review our document handling procedures, and we believe the integrity of Citi's foreclosure process is sound," John Gerspach, Citi's chief financial officer, said on the call.

Citi also benefited from having a global profile; more than half of the bank's revenue comes from overseas. While revenues from North America and Europe fell, Citi was able to take advantage of growth in emerging markets. Revenues from Latin America and Asia both grew.

"Citi is well-positioned to participate in a credit quality cleanup in the U.S. and also the high pace of growth in Latin America and Asia," said Anthony Polini, managing director at Raymond James.

Citigroup was one of the hardest-hit banks during the financial crisis of 2008 and received $45 billion in government aid, $25 billion of which was converted to stock. The government continues to reduce its stake in Citigroup and has indicated that it plans to sell off the entire stake by December.

In another sign that the worst might be over, fewer of Citi's customers were late on payments on both credit card and mortgage loans. Overall there were 19 percent fewer consumers who were late by 90 days or more on payments on credit cards, Citi reported.

Rival banking giant JPMorgan Chase also saw similar trends, with narrower losses from failed loans and fewer delinquencies. Bank of America Corp. reports results Tuesday.

Citi's shares rose 22 cents, or 5.6 percent, to $4.17.

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AP Business Writer Stephen Bernard contributed to this report.

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