Citigroup delight as profits rise to $2.2bn

Citigroup reported a third consecutive quarterly profit today as losses slowed and the bank set aside less money to cover bad loans.

Its trading and investment banking operations, whose European base employs more than 5,000 staff in Canary Wharf, posted profit of $1.38 billion (£867 million) against $829 million in the same quarter a year ago.

Citigroup, which remains 12% owned by the US taxpayer, said overall third quarter net income was $2.17 billion (£1.37 billion) against $101 million a year ago.

The bank earned $2.6 billion on an ongoing basis, excluding an $800 million pre-tax loss on the sale of its student loans business.

Citi has recovered from the worst of the losses that forced it to take three bailouts in 2008 and 2009. But like its rivals, it has struggled to make new loans this year.

The company's shares were up 1.3% at $4.00 in pre-market trading on Wall Street.

Analysts, who tend to discount earnings powered by reserve releases as "low-quality", have questioned how bank profits can keep growing if a sluggish economy results in low loan demand and relatively high credit losses.

"It's a problem for all the banks now - they have trouble raising revenues," said Matt McCormick of Bahl & Gaynor Investment Counsel. "Reducing loan loss reserves is not something you can do indefinitely - eventually, they'll get to the point where they'll say, 'We can't keep going down this path.'"

Citigroup's outstanding loans, after subtracting money set aside to cover losses, fell 5.5 percent as consumer loans dropped. Corporate loans edged higher.

"We're not seeing the same shrinkage" in loan portfolios as before, chief financial officer John Gerspach said.