Citigroup Inc posted a $7.6 billion quarterly loss on costs related to TARP repayment and still high loan losses, but the bank's shares edged higher as some investors saw glimmers of hope.

The bank's losses on consumer and corporate loans fell compared with the third quarter, reassuring investors that credit costs may be stabilizing.

They've crept out of the abyss like everyone else, said Henry Asher, president at Northstar Group, whose clients own Citi shares.

They have a long way to go before they start reporting significant profits, Asher added.

The third-largest U.S. bank said its quarterly loss amounted to 33 cents a share, compared with a loss of $17.3 billion, or $3.40 a share, a year earlier.

The loss matched analysts' average estimate, according to Thomson Reuters I/B/E/S. Citigroup shares rose 4 cents, or 1.2 percent, to $3.46 in morning trading.

It's not an impressive quarter in my view, said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel. Investors are still worried about further credit losses ahead, as well as the impact of sweeping changes to banking regulation, McCormick said.

New York-based Citigroup set aside $8.2 billion in the quarter to cover credit losses and other items, compared with $12.7 billion in the 2008 fourth quarter. Loan losses were $7.14 billion, up 16 percent from a year earlier but down from $7.97 billion in the third quarter.


For a graphic on Citigroup earnings, click on:


On a conference call with reporters, Chief Financial Officer John Gerspach said Citi saw most parts of its corporate credit portfolio stabilize in the fourth quarter. He also said there are signs the economic recovery is taking hold outside the United States.

Like JPMorgan Chase & Co , which reported a fourth-quarter profit of $3.3 billion on Friday, Citigroup's bumper investment banking revenue in 2009 helped offset deepening consumer credit losses.

Gerspach said investment banking businesses, including merger advisory, will continue to be a focus for the bank.


Citigroup is the second major bank to report fourth-quarter results, following JPMorgan. Bank of America Corp , the largest U.S. bank, and Wells Fargo & Co are due to report on Wednesday.

Citigroup has been struggling to return to profitability in its main lending businesses after posting more than $100 billion of credit losses and writedowns since the credit crunch began in 2007.

The bank sold $20.5 billion of stock and convertible bonds in December to repay $20 billion of government bailout funds. The repayment should bring less government oversight in areas such as compensation, but it came at a cost.

The bank recorded a nearly $5 billion after-tax loss because repaying the bailout entailed buying back securities from the government at a lower price than their value on the bank's books. Ending an agreement for the government to absorb outsized losses on a pool of assets resulted in another $1.27 billion hit to earnings, after taxes.

Citi was forced to sell shares at $3.15 apiece, well below their level before the bank announced a share sale and below the $3.25 price at which the government bought its shares. The low sale price forced the government to delay selling off a portion of its stake in the bank, which it had originally planned to do as part of Citigroup's deal to repay the bailout funds.

The government still owns 7.7 billion Citigroup shares, worth about $26 billion at current market prices.

Citigroup shares fell more than 50 percent in 2009, while the KBW Bank index <.BKX>, a broader measure of banks, dropped just 3.6 percent.

(Reporting by Dan Wilchins; Additional reporting by Clare Baldwin and Elinor Comlay; editing by John Wallace)