UPDATE: Citi 3Q Profit Soars As Credit Losses Decline

Citigroup Inc. (C) managed to grow its core businesses broadly in the third quarter. Revenue and profits rose from the year-earlier period despite wobbly capital markets as Chief Executive Vikram Pandit appeared to turn the ship in a new direction.

The bank's third-quarter profit was $2.2 billion, up from $101 million a year earlier, with per-share profit of seven cents coming in just above analysts' estimates. The amount the bank set aside for credit losses fell. Revenue rose 2% from a year earlier, to $21 billion, but fell 6% from the second quarter.

To Pandit, the third consequtive quarterly profit is "continued evidence that we are successfully executing our strategy and we believe we have put in place all the elements for continued profitability," he said in a press release. Citi was up 1% to $3.99 premarket.

Total credit-loss provisions were $5.92 billion, down from $9.1 billion a year earlier and $6.67 billion in the prior quarter. The bank took $2 billion out of its reserve for future loan losses, $500 million more than in the second quarter.

Citi's investment banking results were weaker; a falloff in trading hurt results at J.P. Morgan Chase & Co. (JPM) and are expected to hit Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS), the two large monoline investment banking firms. But its stronger historical focus on debt underwriting cushioned the decline from the strong second quarter. Capital markets revenue rose 14% from a year earlier, and profits rose a strong 66%, to 1.4 billion. Consumer banking revenue rose 33% and that division's profit rose 75%, to $1.2 billion.

Anemic loan demand, however, did not improve and the bank grew its assets by adding investment securities. The legacy businesses and assets in the Citi Holdings division it is selling or running off continued to be a drag on results, more so in the third quarter than in the second; Holding's loss was $1.1 billion.

Citi continued slimming itself down by splitting off assets of late, recently selling $1.6 billion of retail credit-card assets to General Electric Co. (GE) and agreeing to sell its 80%-owned Student Loan Corp. (STU) to Discover Financial Services (DFS) as part of a $600 million transaction, recording a $374 million loss on the sale.

Citi's per-share earnings were 7 cents, compared with a prior-year loss of 27 cents. Analysts polled by Thomson Reuters had most recently forecast earnings of 6 cents on $21 billion in revenue.

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; [e-mail]