Commenting on the news in a press release, Pandit said, "Our most significant challenge now remains consumer credit. Losses in our consumer businesses have been growing for some time, but we see some positive signs of moderation in those loss trends. Sustainable profitability remains our primary goal."

Citigroup remains suspect in the eyes of many banking insiders, who see the company's large balance sheet as being too unwieldly to manage effectively. Citigroup has said that it plans to split off several of its operating units into a "bad bank" under the name Citi Holdings, which will include brokerage, asset management, and consumer finance. The company's balance sheet now includes $1.85 trillion in assets, down 12 percent from last year and 22 percent from the peak levels reached in 2007.

Importantly for Citigroup, the quarter bought more time to work on recapitalizing their balance sheet and establishing a sustainable business franchise. As the U.S. government converts its preferred stock into common shares, Citigroup's regulatory capital ratios will become among the highest of any bank in the world. Deposits also were up six percent on the quarter -- another positive, as the cheap funding from deposits is the classic way that banks make money. Net interest margin, or the spread between what a bank pays for funds and can lend them out at, continued to rise. Still, the company also took a charge of $3.9 billion to increase its loss reserves on bad loans, indicating that there are still many billions in bad debt expense to come.

The results come the same morning as Bank of America (BAC), which announced a $3.2 billion profit,. Bank of America stock was also down in morning trading, as CEO Ken Lewis offered no reassurances to investors that the economic cycle was turning soon.

James Cullen also edits and writes at CollegeAnalysts.com. He is the Vice-President of the Boston College Investment Club, which owns BAC, but has no personal position in the stocks mentioned above.