• Citigroup reported third-quarter results Tuesday that beat Wall Street expectations, with growth in investment banking and wealth management.
• However, the bank set aside more money to offset potential loan losses.
• Citi's banking division reported an 18% increase in revenue year over year, led by a 31% gain in its investment banking arm. Wealth revenue rose 9%.

Citigroup reported third-quarter results Tuesday that topped Wall Street expectations, with growth in investment banking and wealth management. However, the bank set aside more money to offset potential loan losses.

Shares of the bank, which had traded higher before the market's open, finished the day down 5.1%.

Here's what the company reported compared with what Wall Street analysts surveyed by LSEG were expecting:

• Earnings per share: $1.51 vs. $1.31 expected
• Revenue: $20.32 billion vs. $19.84 billion expected

During the quarter, net income fell to $3.2 billion, or $1.51 per share, from $3.5 billion, or $1.63 per share, a year earlier. Earnings were hurt by a higher cost of credit, including a net build of $315 million in Citi's allowance for credit losses.

Chief Financial Officer Mark Mason said on an analyst call Tuesday that the bank is seeing a "stabilization" in loan delinquency among its retail services clients and is "well reserved" in that area.

Revenue rose 1% to $20.32 billion from $20.14 billion a year ago. Contributing to the increase was an 18% jump in banking revenue, led by a 31% gain in its investment banking arm. Wealth revenue rose 9%.

On the markets side, equity markets revenue rose 32% year over year, but fixed income revenue dipped 6%.

Citigroup CEO Jane Fraser took over in March 2021 and has focused on slimming down the bank during her tenure. That includes reducing Citigroup's global presence and laying off workers.

"Our transformation is our number one priority. This quarter, we closed another longstanding consent order which related to the effectiveness of our anti-money laundering systems. We have increased our investments in areas where we have not made sufficient progress, such as data quality management," Fraser said on the call.

"I and the management team remained steadfast and determined to get this transformation right and to get this done," Fraser continued.

Citi's net interest income fell 3% year over year to $13.4 billion as the margin shrank. Net interest income was $11.96 billion, excluding the markets business, which also declined from a year ago. The company said it expected the nonmarkets metric to be roughly the same in the fourth quarter as in this period. However, the firm did not give net interest income guidance for 2025.

Citigroup did drive down expenses by 2% year over year and said it expected full-year expenses to match guidance of $53.5 billion to $53.8 billion, excluding some regulatory costs.

Shares of Citigroup were up more than 28% year to date through Monday, outperforming both the S&P 500 and the financial sector.

The other major banks that have reported third-quarter results so far have also beaten earnings expectations, including Goldman Sachs and JPMorgan Chase.