Citigroup profit up 68% on accounting adjustment

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NEW YORK (MarketWatch) -- Citigroup Inc.'s C, -0.06% third-quarter earnings rose 68% from a year earlier, lifted by an accounting adjustment and continued strength in the bank's international operations.

Citi booked a $1.9 billion gain tied to the valuation of its own debt, and continued improvement in losses from soured loans allowed the bank to reduce its loan loss reserve by $1.4 billion. Still, Citi's $3.74 billion profit managed to beat analyst expectations even without the accounting gain.

Shares were recently up 1.3% in premarket trade to $28.77.

Revenue, however, fell 8% from a year earlier excluding the gain, to $18.9 billion. Consumer spending abroad, particularly in Asia, improved revenue but couldn't offset the hit from declining investment banking and trading business that suffered in the third quarter at all major Wall Street banks. Revenue from capital markets businesses fell 12% to $4.8 billion.

Citi returned to profitability last year after deep struggles during the financial crisis. The bank has aggressively grown its presence in fast-growing markets like Asia and Latin America, a strategy Chief Executive Vikram Pandit has said would help Citi return capital to shareholders next year.

Yet both the push abroad and higher legal costs to resolve mortgage-related challenges have lifted the bank's expenses in recent quarters, sparking criticism from some analysts. In the most recent period, overall costs rose 8.2% from a year earlier.

Citi reported a profit of $1.23 per share--84 cents excluding the accounting change--compared with $2.23 billion, or 72 cents a share a year earlier. Analysts polled by Thomson Reuters expected a per-share profit of 81 cents on $19.25 billion in revenue.

Citicorp, the company's retail banking and commercial and investment-banking business, saw profit jump 32% from a year ago as revenue rose 8.7%. Citi Holdings, which includes assets the company is seeking to unload, posted a narrower loss.