updated 4/17/2006 7:43:57 AM ET 2006-04-17T11:43:57

Citigroup Inc., the nation’s largest financial institution, on Monday reported its first-quarter profit rose 4 percent, beating Wall Street projections due to record investment banking returns.

The company reported a profit of $5.64 billion, or $1.12 per share, for the January-March period, up from $5.44 billion, or $1.04 per share, in the year-ago period. Earnings from continuing operations rose 13 percent to $1.11 per share.

The New York-based financial services powerhouse reported record fixed-income returns and a strong performance from the equity markets helped lift revenue from continuing operations to $22.18 billion from $21.2 billion last year.

Analysts, on average, projected Citigroup would report a profit of $1.02 per share on $23.2 billion of revenue, according to Thomson Financial.

Citigroup joined other Wall Street institutions in reporting its strongest quarter of merger and acquisition activity since 2000, helping to offset the impact of rising interest rates on other businesses.

“We are seeing the benefits from our investment spending, which helped generate record revenues in our international businesses and record revenues globally in our corporate and investment banking business,” said Chief Executive Charles Prince in a statement. “Strength in these franchises more than offset weaker results in our U.S. consumer business.”

Corporate and investment banking profit increased 21 percent to $7.28 billion from $6.04 billion a year earlier. Citigroup has been one of Wall Street’s leaders in global debt and equity underwriting during the quarter, and has consistently led in announced global merger and acquisition deals.

Citigroup’s results come one month after Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. announced blockbuster earnings for the quarter that ended in February, buoyed by record revenue from equity sales and trading.

However, Citigroup’s global consumer business — which includes credit cards, consumer finance and retail banking — fell 1 percent to $12 billion from $12.12 billion in the year-ago period. The narrowing gap between short-term borrowing costs and long-term interest rates cut profit margins on loans throughout the banking industry.

Results also included a $520 million after-tax charge to expense stock options, and a $657 million benefit to resolve a federal tax audit for the fiscal years 1999 to 2002.

The quarterly earnings also mark the swan song at Citigroup for chairman Sanford Weill. The 73-year-old Wall Street luminary steps down as chairman at the company’s annual meeting Tuesday. He started a financial services business 17 years ago which he expanded through more than 100 acquisitions capped by the 1998 deal in which Travelers Group combined with Citicorp.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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