When Citigroup Inc reports second-quarter results on Friday, investors will scrutinize its loan book for signs that the bank is on a sustainable path to profit growth.

The stakes for Citigroup were raised on Thursday when stronger rival JPMorgan Chase & Co said its loan balances are increasing as it reported a $5.43 billion quarterly profit.

That slow growth indicated that loan books, which have broadly been shrinking since the financial crisis, may be stabilizing or even growing now.

But Citigroup is not expected to perform quite as well as JPMorgan Chase. Analysts on average expect the bank to earn 96 cents per share, compared with a year-earlier profit of 90 cents per share, adjusted to account for a reverse split this year.

It is expected to be the sixth consecutive quarterly profit for Citigroup, which needed $45 billion in U.S. bailouts to survive the financial crisis.

But profit growth has come mainly from the bank setting aside less money to cover bad loans, which is not a source of profits long term.

Since December, when the U.S. government sold off the last of its common share stake in Citigroup, Chief Executive Vikram Pandit has been trying to show investors that the bank can move beyond recovery to growth.

Boosting business has been difficult this year for most U.S. banks, as weak fixed-income trading and market volatility weighed heavily on Citigroup and its main rivals.

JPMorgan Chase said on Thursday that bond trading revenue fell in the second quarter, though the drop-off was not as bad as some investors had feared.

This year, Pandit has tried to rebuild Citigroup's investment bank, which lost talent, business and reputation during the crisis. Since taking over the bank at the start of the crisis, he has shed assets and tried to refocus Citigroup on its main banking businesses.

This spring Citigroup reinstated a nominal dividend, after shrinking its outstanding share count with the 1-for-10 reverse split.

Investors remain skeptical that the bank's recovery is completely over. Citigroup's shares have fallen more than 13 percent since the split took effect, and closed down 1.1 percent at $39.02 on Thursday.

(Reporting by Maria Aspan; Editing by Phil Berlowitz)

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