NEW YORK, United States — Citigroup yesterday reported fourth-quarter net income of US$1.3 billion after it recorded fewer losses from loans, allowing it to take money out of reserves it keeps aside for such loans.

However, the volatile fixed-income market — pressured by the bailout of Ireland and falling bond prices — reduced earnings at the New York bank.

Citigroup’s result fell short of analysts’ estimates. On a per share basis, Citigroup’s earnings amounted to four cents a share, while analysts surveyed by FactSet were looking for seven cents a share.

Citi’s stock was down five per cent in pre-market trading.

The results were an improvement compared to the loss of US$7.6 billion, or 33 cents a share, reported for the same quarter of last year. Citigroup reported fourth quarter revenue of US$18.37 billion, compared to US$5.4 billion a year earlier.

For the year, it reported a profit of US$10.6 billion on revenue of US$86.6 billion. It’s the first year the bank reported an annual profit since 2007.

More of Citigroup’s customers were able to meet payments on credit cards and home loans. Its credit losses of US$6.9 billion were down US$805 million from the previous quarter, or 11 per cent, marking the sixth consecutive quarter of decline. The reduced losses allowed the bank to release US$2.3 billion from the reserves that it had set aside for bad loans.

As expectations of an economic recovery have increased, the New York bank has set aside US$4.8 billion for future losses, its lowest level since the second quarter of 2007.

This is the first time that the bank is releasing results after being partly owned by the US government for two years. The US Treasury sold the last of its equity stake in December.

“2010 was a year full of milestones and was critical for the turnaround of this institution,” said Vikram Pandit, CEO of Citigroup.