Financial Winners & Losers: Citi

Investors took a glass-half-full approach after several financial companies reported poor-but-not-too-awful quarters, boosting stocks in the sector Friday.

Banking giant Citigroup (C Quote) led the way higher on better-than-expected financial results. The nation's largest bank delivered a loss of 54 cents a share for the second quarter vs. the $1.24 it earned for the same period last year. Analysts, according to Thomson Reuters data, called for a loss of 66 cents a share.

The $2.5 billion shortfall was less than what the market expected, and relieved investors propelled the stock up 9% to $19.58. The bank laid off 6,000 employees in the second quarter and wrote down assets of $7.2 billion. Consumers affected by the weakening economy have begun to default on home-equity loans, auto loans and credit cards. Washington Mutual (WM Quote) basked in the glow of Citi as its shares jumped 16% to $5.80

The nation's largest brokerage, Merrill Lynch (MER Quote), had a similar story. The stock was mixed in trading, but lately was only declining 36 cents to trade at $30.37. Not a bad tumble considering the brokerage reported a second-quarter loss of $4.7 billion, or $4.97 a share. The results were much worse than analysts had been expecting.

Merrill wrote down $3.5 billion in toxic CDOs and then set aside another $2.9 billion to cover the downgrade in the credit ratings of the bond insurers. To top it off, the brokerage recorded losses of $1.7 billion in the investment portfolio of U.S. banks and $1.3 billion from mortgage exposure.