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Updated from 1:11 p.m. EST

A year of corporate scandal took its toll on


(C) - Get Citigroup Inc. Report

, as the bank reported Tuesday that fourth-quarter earnings fell 37% from a year ago, mostly because of a previously announced $1.3 billion charge.

In the quarter, the nation's largest financial-services firm generated $2.43 billion in net income, or 47 cents a share, compared to $3.88 billion, or 74 cents a year ago.

Citigroup's fourth quarter numbers also were weighed down by a $254 million after tax charge to cover an increase in the bank's loan loss reserve.

Wall Street analysts, according to estimates compiled by Thomson Financial First Call, had been expecting the bank to earn 46 cents a share. Last month most analysts had significantly reduced their earnings estimates for the bank, after Citigroup announced the hefty litigation-related charge.

The $1.3 billion charge includes the cost of Citigroup's settlement with securities regulators, stemming from a yearlong investigation into Wall Street conflicts of interest. It also include a reserve set up to cover the cost of settling private lawsuits and arbitration claims arising from that settlement, as well as the class-action lawsuits brought by shareholders of





Many industry experts believe the bank will have to take additional litigation-related charges in the coming months. But bank officials chose to emphasize the positive.

"We're thrilled that we can talk about 2002 in the past and talk about what the future may look like, which we're very positive about,'' said Citigroup Chairman and Chief Executive Sandy Weill, during an afternoon conference call with Wall Street analysts.

Weill, whose reputation as a Wall Street wheeler-dealer was tarnished during the conflict of interest investigations, said he's personally looking forward to putting 2002 behind him. "I hope it's better for me,'' he said.

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Weill also predicted Citigroup would return in 2003 to posting double-digit earnings growth, something it failed to achieve in 2002. Last year, the bank's full-year net earnings rose 8% to $15.3 billion.

Weill boasted that Citigroup continues to make more money than most other companies.

The market didn't share Weill's enthusiasm. The stock, in late afternoon trading, was down 57 cents, or 1.5%, to $36.62. But most other bank and financial stocks also were trading lower.

Citigroup's stock fell even though the bank announced it was raising its quarterly dividend by 11% from 18 cents to 20 cents.

"There were no real surprises,'' said Timothy Ghriskey, president of Ghriskey Capital, a Connecticut-based hedge fund.

Citigroup is one of two big U.S. banks to reports to report earnings on Tuesday. The other is California-based

Wells Fargo

(WFC) - Get Wells Fargo & Company Report

, which reported that its fourth-quarter profits rose 10%.

Earnings at Wells, the nation's fourth-largest bank, were fueled by a rise in consumer lending -- including home mortgages. The bank earned $1.47 billion, or 86 cents a share, compared with $1.33 billion, or 77 cents a share, a year ago. The bank met the First Call consensus estimate.

Meanwhile, overseas,

Credit Suisse Group

, the parent company of

Credit Suisse First Boston

, reported particularly grim news to round out a bad year for the Swiss financial-services firm.

Credit Suisse reported that it lost $2.48 billion for all of 2002, in part because of the poor performance of its U.S.-based CSFB investment banking arm. In the fourth quarter, CSFB is expected to lose $790 million, and $1.2 billion of the year. Like Citigroup, the CSFB fourth-quarter loss includes a big charge related to cost of settling the many regulatory investigations into the firm's business practices. Credit Suisse will issue a full earnings report next month.

The banking sector, meanwhile, could get a boost today from news that regional bank


(BBT) - Get BB&T Corporation Report

is buying

First Virginia Banks


, another regional bank for $3.38 billion. Some analysts have predicted that the hot merger prospects in the banking sector this year will be the regional banks, some of the industry's strongest performers last year.

But Wall Street is likely to be most focused on Citigroup's numbers, not only because of its size, but because it is one of the most widely held stocks.

In a press release announcing its fourth-quarter numbers, Citigroup predicted that it would return this year to delivering double digit earnings growth.

An look at Citigroup's fourth-quarter numbers once again reveals that it's Citigroup's retail banking business that's kept the bank chugging along. In the quarter, Citigroup's global consumer division -- which includes fees from credit cards and consumer loans--generated $2.37 billion in profits, a 26% increase from last year.P/>And Citigroup needed a strong performance from its retail operation to offset the poor performance of its Salomon Smith Barney investment banking division. The division lost $344 million in the quarter, while taking in $4.66 billion in revenues, a 9% year-over-year decline.

Like other Wall Street firms, Citigroup's earnings were hurt by the long drought in demand for investment banking services.

The big corporate lender also continues to grapple with the impact of bad loans on its books to the energy and telecom industries, as well as Latin America. At year's end, the bank's reserve for loan losses stood at $11.7 billion, a 16% increase from a year ago.

But some bank analysts wonder if the consumer will continue bailing Citigroup out. Consumer lending and banking accounted for 57% of the $18.9 billion in net revenues the bank took in during the fourth-quarter. Yet there are a few signs of potential consumer fatigue and that could pose a problem for Citigroup down the road, if the economy weakens.

The bank reports that in the fourth quarter it carried $495 million in repossessed "consumer'' real estate assets on its books, a 26% increase from a year ago and 5% rise from the third quarter. Admittedly, that's not a lot for a bank the size of Citigroup, but it's a sign that some homeowners are having troubling paying their monthly mortgage bill.

On the bight side, the rate of total consumer delinquencies declined in the quarter to 2.98% from 3.17%.

Still, David Hendler, a financial services analyst with CreditSights, a credit-rating agency, remains a skeptic. He said much of the consumer growth has come from "overly aggressive'' lending practices by the bank. And he worries that the bank could start to registers higher consumer loan and credit-card defaults it the economy worsens, or the job market remains flat.

"You've got to wonder and scratch your head about how good that

consumer growth is," said Hendler. "We think they are overly aggressive right now. The stock has no driver."