Citigroup yesterday said second-quarter profit fell 73 per cent to a nearly six-year low, after setting aside $4.95 billion (€4 billion) for legal costs tied to WorldCom, Enron and other corporate scandals.

The world's largest financial services company said net income fell to $1.14 billion, or 22 US cents per share, from $4.3 billion, or 83 cents per share, a year earlier.

Excluding exceptional items, Citigroup, which employs about 1,200 people in Dublin, said profit rose 24 per cent to $5.34 billion, or $1.02 per share, as retail banking and credit card income rose while bad loans fell. On that basis, analysts on average had forecast profit of 97 cents per share.

Revenue rose 15 per cent to $22.3 billion, but fell from the first quarter in six of Citigroup's 10 main product segments.

"Citigroup papered over this by reducing reserves for loan losses, which adds to profit," said Mr Richard Bove, an analyst for Hoefer & Arnett in Pinellas Park, Florida. He cut his rating for Citigroup to "neutral" from "strong buy". Expenses, meanwhile, rose 87 per cent to $18.6 billion.

Excluding the legal charges, expenses rose 7 per cent.

In May, Citigroup said it would pay $2.65 billion to settle claims by investors in WorldCom, now known as MCI, that it hid risks.

It also increased reserves to pay for lawsuits involving energy trader Enron, alleged biased stock research, initial public offerings and other matters.

Reuters