Citi Earnings Beat Spurs Optimism (Update2)

Updated from 2:50 p.m. EDT

It's a long, slow road for troubled Citigroup(C Quote), but as the financial titan on Friday posted second-quarter earnings that were not as bad as some had feared, perhaps there is a crack of light showing through.

Trimming its second-quarter losses in half vs. the first quarter and beating Wall Street's bleak estimates, Citi posted a loss of $2.5 billion, or 54 cents a share. The loss was driven by $6.7 billion in writedowns related to the bank's exposure to subprime, downgraded bond insurers, commercial real estate and alt-A mortgages. Revenue declined 29% to $18.7 billion because of the writedowns.

Citi's loss from continuing operations was $2.2 billion, or 49 cents a share. Both the loss and revenue figures beat the consensus outlook of analysts polled by Thomson Reuters, which expected a loss of 66 cents a share on revenue of $17.72 billion.

"While there is still much to do, we are encouraged by our progress in delivering on our commitment to the re-engineering efforts," CEO Vikram Pandit said in a company statement.

The decent earnings report sparked shares to rally as much as 14% on Friday. Shares closed up 7.7% to $19.35.

Writedowns in the company's securities and banking operations dropped by 42% from the first quarter, Citi said.

In its securities and banking arm, the company had a $3.4 billion writedown on its subprime mortgage-backed securities, downward credit value adjustments of $2.4 billion related to the exposure to the monoline insurers, a $545 million writedown on its commercial real estate-backed securities and $428 million writedown on funded and unfunded leveraged loans.