Citigroup Inc posted a quarterly per-share loss as it suffered $8 billion of credit losses, raising questions about when the bank can return to sustained profitability.

The loss per share was narrower than analysts expected but still underlined how far the bank has to go to catch up with stronger rivals like JPMorgan Chase & Co . Citigroup has received $45 billion of capital from the U.S. government and is now one-third owned by taxpayers, while JPMorgan has paid back the government bailout it received last year.

Citigroup's shares were down 6 percent to $4.70 in afternoon trade.

On first blush, this is not particularly optimistic, said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. They did beat on earnings and revenue, but the $8 billion credit losses ... is a reminder that we are in a weak economic environment.

The bank did post net income of $101 million, but it reported a $529 million loss from continuing operations before taxes. The ultimate bottom line for shareholders was negative, including one-time losses from converting preferred shares into common stock, and tax benefits.

Results were further muddied by accounting losses that resulted from the bank's bonds performing better.

It can give you brain damage trying to figure this out, said Walter Todd, portfolio manager at Greenwood Capital Management in Greenwood, South Carolina. With all the other opportunities out there in the financial space, I don't know why you'd spend the time to try to understand what the heck's going on here, unless you can take a lot of risk.

Citigroup set aside less money to cover bad loans than it did in last year's third quarter, but that may make sense because the bank's assets also declined from the year-ago period, and net credit losses declined from the second quarter. The bank said it has enough money set aside to cover losses in consumers loans for the next 13.3 months, the highest level in at least two years.

Analysts have struggled to nail down when Citigroup will start posting profits from its main businesses. Some have forecast a return to core profitability as soon as early next year.

The bank's inability to post earnings from its main businesses has made some analysts impatient. But others argue that by the time the bank is clearly profitable, its shares will no longer be cheap. The shares trade at about three-quarters of their book value, while competitors trade above their book value.

A key source of uncertainty for Citigroup is the performance of its U.S. credit card and mortgage loans, which have suffered and may be stabilizing.

Clearly, U.S. consumer credit remains the number one issue affecting our near-term results, Chief Executive Vikram Pandit said on a conference call with analysts.

Citigroup has posted more than $100 billion of writedowns and consumer credit losses since the credit crisis began. It posted more than $37 billion of net losses between the fourth quarter of 2007 and the fourth quarter of 2008.

In the third quarter, it posted a net loss to shareholders of $3.2 billion, or 27 cents a share, compared with a loss of $2.9 billion, or 61 cents a share, a year earlier.

Analysts' average forecast was a loss to shareholders of 38 cents a share.

BETTER BY OTHER MEASURES

The bank reported net income of $101 million, which excludes preferred stock dividends and a $3.1 billion charge linked to converting preferred shares into common stock. In the same quarter last year the bank posted a net loss of $2.8 billion.

Citigroup suffered $8 billion of credit losses, compared with $4.9 billion in the same quarter last year and $8.4 billion in the second quarter of 2009.

The bank said revenue in its securities and banking unit dropped by about a third, to $4.89 billion. Excluding the impact of an accounting loss from improved credit spreads, the unit's revenue was $6.6 billion.

Major competitors including JPMorgan Chase and Goldman Sachs Group Inc posted big increases in investment banking revenue, driven in large part by fixed-income trading.

Net revenue at Citigroup rose 25 percent from a year earlier to $20.39 billion.

Total assets rose 2 percent from the second quarter, to $1.89 trillion.

Pandit has struggled to fix a bank formed through decades of acquisitions that resulted in a hodgepodge of fiefdoms. He has tried to shed bad assets and focus on Citigroup's main businesses, including international commercial and investment banking.

In a conference call, Citigroup Chief Financial Officer John Gerspach declined to comment on a possible timetable for repaying TARP funds. But he insisted the bank had the capacity to begin to repay TARP and that it was just a question of when.

Citigroup shares are down roughly 30 percent this year, compared with a rise of about 10 percent rise in the KBW Bank index <.BKX> and a nearly 50 percent advance by shares of Citigroup rival JPMorgan Chase & Co.

Citigroup earlier this year separated the businesses it wanted to keep, which it calls Citicorp, from the units and assets it aims to shed, which it calls Citi Holdings.

(Reporting by Dan Wilchins; editing by John Wallace)

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