Citigroup Steers Past the Potholes

Outside of Japan, the rest of Asia, where Citigroup has stepped up its operations, is one of the bank's strong suits, with earnings rising 50% to $644 million. Mexico is another bright spot, with earnings rising 49% to $431 million.

Things continue to improve at Citigroup on the bad loan front, something that had cut into earnings during the bear market. In the quarter, the bank released $350 million from it loan loss reserve, reflecting a reduction in bad outstanding corporate loans.

Citigroup also released $212 million from its consumer credit reserve. Prudential analyst Mike Mayo said that without the releases, Citigroup would have missed analysts' operating estimates by 2 cents a share.

"While there could be other offsets (positive or negative), the reserve releases make it look like a stretch to make this quarter's number on a core basis," he wrote in a research note.

Analysts also noted that the bank's sequential operating expenses were up slightly more than revenue in the quarter due to investments in technology and a lackluster trading environment. Still, Citi's credit outlook "improved markedly in the period," according to Deutsche Bank analyst Richard Strauss.

Shares of Citigroup were recently down 78 cents, or 1.8%, at $44.32.

Meanwhile, several other big banks, including Wachovia(WB), Comerica(CMA) and Fifth Third(FITB), all posted higher profits in the quarter.

Wachovia, the nation's fourth-largest bank, posted a 21% profit gain in the quarter, fueled by continued growth in its consumer lending business. The Charlotte, N.C.-based bank earned $1.25 billion, or 95 cents share, compared to $1 billion, or 77 a share, in the year ago period.

Excluding merger-related charges, the bank earned 98 cents a share. By that measurement, Wachovia exceeded the First Call estimate of 96 cents. But it fell a bit shy on the revenue front. While revenue rose 16% to $5.5 billion, analysts had the bank posting $5.66 billion.

Detroit-based Comerica posted the most impressive numbers of the day, announcing its profits rose 13%, as the bank easily surpassed analyst estimates.

Comerica earned $192 million, or $1.10 a share, compared to $170 million, or 97 cents a share, a year ago. Analysts had the bank, which benefited from a sharp reduction in money set aside from loan losses, earning 93 cents a share.

Cincinnati-based Fifth Third posted an 8% profit gain. It earned $447.5 million, or 79 cents a share, compared to $415.3 million, or 71 cents a share, a year ago. The bank matched the analyst estimate.

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