Updated from 9:05 a.m. EDT

Citigroup ( C) gave Wall Street what it wanted Thursday, reporting that first-quarter earnings rose 29% from a year ago, thanks to strength in each of its business segments.

The world's biggest financial services firm earned $5.27 billion, or $1.01 a share, in the latest quarter, compared with earnings of $4.10 billion, or 79 cents a share, last year. Revenue rose 16% to a quarterly record of $21.5 billion. The quarterly profit was one of the biggest ever reported by a U.S. company and continues a string of blowout numbers at Citi dating back more than a year.

Each of the bank's nine business groups recorded higher revenue and double-digit earnings gains, with its consumer and investment banking divisions leading the way. The latest quarter included a gain of $180 million, or 3 cents a share, from the sale of its electronic funds services business.

Analysts surveyed by Thomson First Call had been forecasting earnings of 94 cents a share, excluding the gain. Most analysts had been expecting the firm to post a profit of $4.5 billion and revenue of $21.04 billion, but many also had been saying they wouldn't be surprised if Citigroup exceeded expectations.

The question remains, however, whether Citigroup's big earnings beat will be enough to take investors' minds off the Federal Reserve and the growing fear that interest rate hikes are just around the corner.

In early trading, Citigroup shares were down 53 cents, or 1%, to $50.42. Other bank stocks also were trading slightly lower, while the Philadelphia KBW Bank Index was unchanged.

"Citigroup's record first-quarter performance demonstrates our unique ability to capitalize on the continued strengthening of the global economy," Citigroup Chief Executive Charles Prince crowed in a press release announcing the earnings. Prince took over the CEO job from Citigroup Chairman Sandy Weill in October.

Among the bank's business segments, income in Citigroup's global consumer unit rose 21% from the year-ago quarter to $2.56 billion; income from its capital markets and banking unit rose 23% to $1.48 billion; and investment management income rose 22% to $551 million.

Within the consumer division, Citi scored big gains in it credit card and retail banking operations. Credit card income rose 37% to $980 million, and retail banking income rose 21% to $1.12 billion.

The global corporate and investment bank remained the top underwriter of stocks and bonds, but investment banking revenue fell by 5% from a year ago because of sharp drop in bond underwriting work. Revenue from debt underwriting fell 24% to $496 million. Revenue from stock underwriting soared 97% to $302 million -- not enough to offset the loss in bonds.

Expenses rose 11%, including $270 million related to higher option, pension and legal costs.

Meanwhile, in Citigroup's shadow, several regional banks -- Comerica ( CMA), Fifth Third ( FITB) and KeyCorp ( KEY) -- also reported earnings Thursday. The results from these small banks were more reflective of the muddled earnings picture that has been emerging from the banking sector as it grapples with a drop in mortgage income and the prospects of higher interest rates.

The best of the bunch was KeyCorp, which exceeded analyst expectations because of higher earnings from its trust and investment business and fewer bad commercial loans in its portfolio. The Cleveland-based lender reported net income of $250 million, or 59 cents a share, compared with $217 million, or 51 cents a share, a year earlier. Analysts had been looking for the bank to earn 53 cents a share in the quarter.

Fifth Third, based in Cincinnati, reported a profit of $430 million, or 75 cents a share, compared with $389.8 million, or 67 cents a share, a year ago. The consensus estimate for the bank was 74 cents.

Comerica reported a disappointing decline in first-quarter profits and said its commercial customers still aren't taking new loans. The Detroit-based lender earned $162 million, or 92 cents a share, compared with $176 million, or $1 a share, a year ago. The bank, however, exceeded the First Call estimate by 3 cents a share.

The news coming from the Midwestern bank about corporate borrowing isn't good for those looking for signs of a strong economic revival, particularly in the manufacturing sector. In a press release, Comerica Chairman Ralph Babb said, "Our commercial customers are still cautious about investing, thus loan demand remained soft."

Indeed, lackluster commercial lending remains a nettlesome problem for banks and continues to confound analysts, who say corporations should be borrowing more at this stage of an economic recovery.

On Wednesday, Bank of America ( BAC), the nation's second-largest bank, reported a modest 4% year-over-year increase in corporate lending. But on a sequential basis, corporate borrowing only rose by 2% from the fourth quarter of last year.

All the banks, including Citigroup, reported continuing improvement on the bad loan front, something that had bedeviled them through the recession. The improvement in bad credits means banks can set hold back fewer dollars to cover potential defaults, something that helps boost earnings.