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TheStreet Open House

Citi Blows Out the Quarter

Story updated with additional information.

NEW YORK ( TheStreet) -- Citigroup (C) reported a 22% year-over-year increase in second-quarter earnings, as the company beat Wall Street's expectations.

Driven by a continued release of loan loss reserves, Citi reported net income of $3.3 billion, or $1.09 a share for the second quarter, compared to $3 billion, or a dollar a share (adjusted for the May 6 one-for-ten reverse split) in the first quarter and $2.7 billion, or 90 cents a share, in the second quarter of 2010.

Citigroup CEO Vikram S. Pandit

The second-quarter results compared to net income of $3.0 billion, or a dollar a share (adjusted for the May 6 one-for-ten reverse split) in the first quarter and $2.7 billion, or 90 cents a share, in the second quarter of 2010, driven by a continued release of loan loss reserves, as well as very strong international consumer banking and transaction services revenues.

The consensus estimate among analysts polled by Thomson Reuters was for Citigroup to post second-quarter earnings of 97 cents a share.

CEO Vikram Pandit said the company "produced growth in both loans and deposits in Citicorp, reduced assets in Citi Holdings, continued to invest in our core businesses, and improved our financial strength." He added that "although the near-term macroeconomic outlook is uneven, Citi is consistently profitable and we remain focused on producing responsible growth by serving our clients."

Investors were likely to cheer a comment by CFO John Gerspach that the company expected to "begin returning capital to shareholders next year and end that year with an 8%-9% Tier 1 Common Capital Ratio under Basel III."

During the second quarter, Citigroup's earnings were boosted by a $2 billion release of credit reserves. This compares to reserve releases of $3.3 billion the previous quarter and $1.5 billion a year earlier.

International consumer banking revenues increased 12% year-over-year to $4.8 billion, as the company reported "growth in virtually all significant consumer banking drivers."

Transaction services revenue increased 6% year-over-year to $2.7 billion, with strength in trading and securities products "particularly in emerging markets?

As expected by analysts, trading revenue continued to weaken, with total securities and banking revenue of $5.5 billion during the second quarter, declining from $6 billion, billion in both the first quarter and in the second quarter of 2010.

Net credit losses for the second quarter totaled $5.1 billion, declining for the eighth-straight quarter, from $6.3 billion in the first quarter and $8.0 billion in the second quarter of 2010.

Second-quarter operating expenses increased 9% year-over-year, to $12.9 billion, "the impact of foreign exchange translation, volume-related expenses in Citicorp, legal and related expenses and ongoing investment spending, which were partially offset by ongoing reengineering benefits and lower expenses in Citi Holdings. "

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