Quarterly profits of $1.3 billion and 2010 earnings of $10.6 billion, frankly disappointed analysts and has led to a sell-off of "C" shares- down 6% for much of today's trading session.  The full-year profit was also a first for CEO Vikram Pandit since he took office;  2009 and 2008 saw combined losses of $20 billion.  

But the rosy profit picture quickly wilted because Q4 earnings were only 4 cents, when they were expected to be 8 cents a share.  Investment banking had lackluster results, although the bank reported having fewer losses on troubled loans.

    An Improbable Wall Street Comeback.   Citigroup needed 3 taxpayer bailouts to stave off collapse.  So, Tuesday’s report marks the latest achievement for Citigroup, which fared worse than most other big banks during the financial crisis.  Last month, the Treasury said it soon would sell its remaining shares in the company.  The government had invested $45 billion in the bank.

Since taking over at Citi, CEO Vikram Pandit has tried to streamline the company’s operations, strengthen its risk management practices and transform itself into a global bank, catering to multinational companies and wealthy individuals.  He 's also cut costs - dropping over 100,000 jobs, about 33% of its work force.

JPMorgan kicked off bank earnings season last week with promising news for the industry: its annual profit surged 48% last year, to $17.3 billion, as losses on troubled loans eased - as well.   [NYT Dealbook, 1/18]

p.s.  Here's CEO Vickram Pandit's note to the troops:

Dear Colleagues,

Today we announced our company’s earnings for the fourth and final quarter of 2010. A year ago, no one would have believed we would have been able to accomplish what we have — and it is all due to your hard work.

2010 was a year full of milestones — and I predict will be remembered as the year Citi turned the corner. We were profitable not only for the full year, earning $10.6 billion, but also in every quarter throughout the year, earning $1.3 billion in net income in the final quarter. (Our fourth quarter earnings include a $1.1 billion charge due to Credit Value Adjustments as a result of the substantial tightening of our credit spreads). Results for our core businesses in Citicorp were also strong: $14.9 billion in net income for the full year and $2.4 billion in net income for the fourth quarter.

In addition, 2010 saw the completion of the U.S. Treasury’s sale of its common stock in our company. In total, the U.S. government earned a profit of approximately $12 billion on its investment in Citigroup. We remain grateful for the American people’s assistance but also excited about our future. Last year we launched a new strategy for our consumer and cards businesses and made key management changes and new hires. Among the results so far: strong growth in regional consumer banking income for the year, provisions for credit losses down by half, and net credit losses down for six consecutive quarters.

We continue to wind down assets in Citi Holdings as quickly as economically feasible. Last quarter saw one of Holdings’ most important sales to date: the divestiture of the Student Loan Corporation for $31 billion. With the completion of that sale, Holdings assets are now 19 percent of our balance sheet. And losses in Holdings are down more than 50 percent year-over-year.

Gratifying as it is to look back on what we’ve done, our real focus must remain on what we need to do: continue to execute our strategy. We’ve entered 2011 with strong momentum — and we’ll need it, as the global economy remains sluggish and growth uneven.

Yet no other bank is better positioned to reap the opportunities presented by unfolding global trends. That’s not an accident. We’ve all worked hard over the last three years to transform this bank into an institution capable of competing at the highest level in our changing world. We’ve done it by working to maximize the value of assets we already have — such as our unmatched global presence — and by creating new value through investments in people, technology and facilities.

Going forward, we plan to accelerate our strategy in Citicorp while continuing to reduce our assets in Citi Holdings. Building on a solid foundation, we can lift our company from sustainable profitability to sustainable growth. I know you’re up to the job.

– Vikram