A Citibank logo is seen in the financial district of San Francisco, California
A Citibank logo is seen in the financial district of San Francisco, California REUTERS

Citigroup Inc posted a $1.3 billion quarterly profit on Tuesday, as losses on bad loans fell, but the bank missed estimates on its earnings as it struggled with a slump in revenue.

Shares of Citigroup fell about 3.5 percent to $4.95 in premarket trading.

The third-largest U.S. bank, which took $45 billion in U.S. bailout funds during the financial crisis, reported a net profit of 4 cents per share for the fourth quarter. That compared with a year-earlier loss of $7.6 billion, or 33 cents per share.

Analysts on average expected Citigroup to post a profit of 8 cents per share for the fourth quarter of 2010, according to Thomson Reuters I/B/E/S.

The bank reported revenue of $18.4 billion, an increase from a year earlier but a 6 percent drop from the third quarter. Citigroup attributed the slump to a slowdown in its investment bank.

It was the fourth consecutive quarterly profit for Citigroup, and its first since the U.S. government finished selling off its stake in the company last month.

Shares of Citigroup closed at $5.13 on Friday -- their highest close since August 2009.

(Reporting by Maria Aspan; Editing by Muralikumar Anantharaman, Dave Zimmerman)