Citigroup $2.5 billion loss soothes investors

By Jonathan Stempel and Dan Wilchins

NEW YORK (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research) posted a smaller-than-expected quarterly loss, despite $11.7 billion of write-downs and credit losses tied to deteriorating capital markets and a slumping economy.

Though the second-quarter loss totaled $2.5 billion, the results soothed investors, who pushed shares of the largest U.S. bank by assets up $1.53, or 8.5 percent, to $19.50 in afternoon trading on the New York Stock Exchange.

Citigroup shares, part of the Dow Jones industrial average .DJI, had bottomed Tuesday at $14.01, the lowest since the bank was created in a 1998 merger.

Investors have long sought signs that the New York-based bank, one of the hardest hit in the year-long global credit crisis, may finally be ready to turn a corner.

"Concerns of an imminent capital shortfall have abated," wrote Mike Mayo, a Deutsche Bank Securities Inc analyst. He upgraded Citigroup to "hold" from "sell" but expressed concern about future write-downs and "still negative" credit trends.

Citigroup's net loss totaled 54 cents per share, and was the bank's third straight quarterly loss. It compared with a year-earlier profit of $6.23 billion, or $1.24 per share.

The operating loss was $2.22 billion, or 49 cents per share, as revenue declined 29 percent to $18.65 billion. On that basis, analysts on average had expected a loss of 67 cents per share on revenue of $17.44 billion, Reuters Estimates said.

"All things considered, it was a decent quarter," wrote William Tanona, an analyst at Goldman Sachs & Co.