Citigroup Inc posted a fourth-quarter loss of $7.6 billion after taking charges linked to repaying government bailout funds.

The results were in line with expectations, and the bank's losses from bad loans declined from the third quarter. But compared to a year ago, losses on consumer and corporate loans were still steep, and the decrease from the third quarter was not enough to reassure investors who had been hoping for more decisive signs that the worst in credit losses was over for Citigroup.

The evidence is that there's still more work to do, said Gary Townsend, chief executive at Hill-Townsend Capital in Chevy Chase, Maryland.

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, in the same quarter a year earlier.

The loss matched analysts' average estimate, according to Thomson Reuters I/B/E/S. Citigroup shares were down 12 cents, or 3.5 percent, to $3.30 in premarket 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.

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. Total loan losses were $7.14 billion in the fourth quarter, up 16 percent from $6.14 billion a year ago but down from $7.97 billion in the third quarter.

Citigroup, the third-largest U.S. bank by assets, is the second major bank to report fourth-quarter results. JPMorgan Chase & Co posted a quarterly profit of $3.3 billion last week, helped by rising fixed-income trading revenue, but suffered deep losses on U.S. mortgage and credit card loans, which disappointed many investors.

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 took a $5.1 billion after-tax hit after 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 reduced earnings by an additional $1.3 billion, after taxes.

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

The bank's December share sale proved to be painful. It 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.

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)