Citigroup said it earned $4.4 billion after payment of preferred dividends, compared with a loss of $696 million a year earlier.
That was the bank's biggest quarterly profit since the second quarter of 2007.
The company cited strong trading of bonds, stocks and other securities for its big profit. Citigroup, one of the hardest hit banks during the credit crisis and recession, said loan losses fell for the third consecutive quarter. The amount of money it set aside for loan losses also fell.
Citigroup earned 15 cents per share on revenue of $25.4 billion. That easily beat analysts' expectations of a slight loss, according to Thomson Reuters.
Citigroup's strong showing follows similarly impressive results last week by Bank of America Corp. and JPMorgan Chase & Co. That has boosted hopes that the worst of the credit crisis has passed and banks may be entering a period of sustained profitiability.
Yet CEO Vikram Pandit sought to dampen short-term expectations for Citigroup, saying the bank remained cautious "given the uncertain economic recovery and high unemployment in the U.S."
"Realistically, we do not expect our performance to follow an invariable trend-line upward," he said. "Longer-term, however, the prospects for Citigroup are clear and bright."
Pandit sounded a little less upbeat about the economy than his counterparts at JPMorgan Chase and Bank of America. But Citigroup's recovery from the devastation of the financial markets has been more difficult.
The bank's stock rose about 1 percent in pre-opening trading. Other financial stocks extended a pullback in response to news that the government was charging Goldman Sachs Group Inc. with civil fraud for mortgage-related transactions.
Citigroup said its total reserves to cover losses from bad loans fell 22 percent, or $2.4 billion, from the fourth quarter to its lowest level in two years. The company said its credit losses fell 15 percent to $8.4 billion from almost $10 billion in the fourth quarter. Citigroup reported improvement across nearly all its loan portfolios.
The company reported $8 billion in securities and banking operations, which includes its trading business. That was up $4.7 billion from the fourth quarter.
Bonds accounted for a big chunk of the trading gain. Like other companies' investment banking operations, Citigroup's benefited from very low interest rates that allowed it to borrow cheaply to buy higher-yielding investments.
Citigroup's stock has been rising lately following the government's announcement last month thatit acquired as part of its bailout of the bank during the credit crisis.
The sale by the government will end the last remaining ties Citigroup has to the Troubled Asset Relief Program. Citigroup received a total of $45 billion from the government during the credit crisis. It repaid $20 billion in December and the remaining $25 billion was converted into the minority stake the government is now selling.
"All of us at Citigroup recognize that we would not be where we are without the assistance of American taxpayers," Citigroup Pandit said.
By AP Business Writer Stevenson Jacobs