updated 10/19/2006 7:37:49 AM ET 2006-10-19T11:37:49

Citigroup Inc. on Thursday said third-quarter operating profit rose 6 percent, helped by gains in its consumer unit, but revenue at the largest U.S. bank fell short of analysts’ forecasts.

Expenses increased, while revenue was little changed. At its investment banking unit, both profit and revenue declined.

Net income from continuing operations rose to $5.3 billion, or $1.06 per share, from $4.99 billion, or 97 cents, a year earlier. Revenue was $21.42 billion, while operating expenses rose 5 percent to $11.94 billion.

Analysts polled by Reuters Estimates on average forecast profit of $1.03 per share on revenue of $22.16 billion.

Net income for the New York-based company fell 23 percent to $5.51 billion, or $1.10 per share, from $7.14 billion, or $1.38, reflecting a year-earlier $2.12 billion gain from the sale of Travelers Life & Annuity to MetLife Inc.

“In our U.S. consumer franchise, we are pleased with the trends we are seeing,” Chief Executive Charles Prince said in a statement. “That said, results from our capital markets related businesses fell short of my expectations.”

Prince is under pressure to re-energize the bank’s struggling U.S. consumer business, control costs and boost Citigroup’s stock price, which has lagged most of its peers.

He is also trying to expand Citigroup’s international presence. On Tuesday, Citigroup said it will pay $3.1 billion for a 20 percent stake in Turkey’s Akbank.

It is Citigroup’s first purchase since the Federal Reserve lifted a ban on acquisitions in April, and Prince’s largest purchase as chief executive in three years as chief executive.

Citigroup shares closed Wednesday at $50.19 on the New York Stock Exchange. Through Wednesday, Citigroup shares have risen 10 percent under Prince, while the 24-member Philadelphia KBW Bank Index is up 30 percent.

Profit from consumer businesses rose 17 percent from a year earlier to $3.2 billion, as revenue increased 4 percent to $12.83 billion.

In U.S. consumer businesses, profit rose 23 percent to $2.24 billion, while revenue rose just 1 percent to $7.8 billion. Net interest margin compressed, Citigroup said.

Citigroup said it opened 277 retail branches and consumer finance offices in the quarter, including 101 in the United States.

Corporate and investment banking profit fell 4 percent to $1.72 billion as revenue declined 6 percent to $6.07 billion. Fixed income revenue fell 16 percent, while investment banking and equity markets revenue were little changed.

Wealth management profit, including the Smith Barney brokerage and private bank, rose 30 percent to $399 million. Profit from alternative investments fell 65 percent to $117 million. Assets rose 17 percent to $1.75 trillion.

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