Citigroup announced quarterly profits of $1.3 billion on Tuesday, bringing its 2010 earnings to $10.6 billion, as the bank saw fewer losses on troubled loans.

This is the first time Citigroup has posted a full-year profit since Vikram S. Pandit was named chief executive in 2007. Citigroup reported a loss of $1.6 billion in 2009, on top of a crippling $18 billion loss the year before. The bank has now turned a profit for four consecutive quarters.

Nonetheless, Citigroup’s quarterly earnings of 4 cents a share disappointed Wall Street, in part owing to lackluster results in the investment banking business. Analysts had been expecting the bank to post profits of nearly 8 cents a share for the period, compared with the 33 cent loss that Citigroup reported in the fourth quarter of 2009.

“I’m pretty happy with the credit quality improvements, but obviously people were expecting more,” said Erik Oja, an equity analyst at Standard & Poor’s, who added that Citigroup’s report was “disappointing.”

Citigroup posted overall revenue of $18.4 billion for the quarter, compared with $7.9 billion in the period a year earlier. But full-year revenue fell 5 percent, to $86.6 billion, from $91.1 billion in 2009, as Citigroup’s investment bank struggled. The bank’s dwindling bond trading revenue was to blame for much of the decline.

With quarterly profits off from analysts’ estimates, shares of Citigroup were down more than 4 percent on Tuesday morning — although the stock remains near its 52-week high of roughly $5. Of course, the stock is still a shadow of its former self, down from a record high of $57 in December 2006.

“2010 was a year full of milestones and was critical for the turnaround of this institution,” Mr. Pandit said in a statement.

It is one of the more improbable comebacks on Wall Street. Amid the financial crisis, the bank needed three taxpayer bailouts to stave off collapse.

Tuesday’s report marks the latest achievement for Citigroup, which fared worse than most other big banks during the financial crisis. Last month, the Treasury said it soon would sell its remaining shares in the company. The government had invested $45 billion in the bank.

Since taking the helm of Citigroup, Mr. Pandit has tried to streamline the company’s operations, strengthen its risk management practices and transform itself into a global bank, catering to multinational companies and wealthy individuals.

He has also cut costs — and more than 100,000 jobs, about a third of the company’s work force.

As with JPMorgan Chase, which reported its fourth quarter earnings on Friday, Citigroup’s results hinged significantly on credit losses. Both banks reported drops in their loan losses throughout the year. In 2010, credit losses reached $30.8 billion at Citi, down from $42.2 billion in 2009. This marked the six straight quarter that the bank’s credit losses fell, thanks largely to improvements in its credit card and residential mortgage portfolio.

Citi also put fewer dollars aside to cover future losses on consumer loans. By the end of 2010, Citi’s total allowance for loan losses was $40.7 billion, or 6.31 percent of loans, compared with $36.0 billion, or 6.1 percent of total loans at the end of 2009.

Meanwhile, the bank’s total provisions for credit losses declined to $4.8 billion in the fourth quarter, bringing the crucial figure to its lowest level since mid 2007.

While Citicorp, its core consumer and corporate banking operation, had a $2.44 billion profit in the fourth quarter, Citi Holdings remained a weak spot. The group, which contains troubled assets the bank is trying to unload, reported a $1 billion loss, compared with a $2.6 billion loss in the period a year earlier.

Citi Holdings is still weighed down by heavy losses from credit cards, mortgages and other consumer loans. The bank wants to sell CitiFinancial, its large consumer lending franchise that serves lower-income customers.

But there are signs of improvement. Citi Holdings, which has moved to unload several businesses like the student lending operation, has shrunk its assets by 26 percent, to $359 billion.

Despite the increasing profitability of the bank, Citi may have to wait longer than rivals to raise its dividend. It’s quarterly profits of 4 cents a share pale next to JPMorgan’s earnings of $1.12.

In the wake of the crisis, Citi had reduced its payout to investors to next to nothing, aiming to shore up its cushion of capital. Now, after more than two years of holding dividends low and steady, Citi and other banks are eager to satisfy retirees and other conservative investors, who often hold bank stocks as a reliable source of income.

But the bank must first receive approval from regulators. The Federal Reserve is embarking on a second round of so-called bank stress tests, focusing on whether banks have sufficient capital. When the tests are completed, the Fed is expected to approve dividend increases for JPMorgan Chase and others.

Analysts expect Citi to wait until late 2011 or early 2012. “You’re going to live a little more conservatively now that you’ve got a second lease on life,” said Glenn Schorr, an analyst at Nomura Securities International.

JPMorgan kicked off bank earnings season last week with promising news for the industry: its annual profit surged 48 percent last year, to $17.3 billion, as losses on troubled loans eased.

Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo will report their fourth-quarter results later this week.

Analysts are cautiously optimistic that the banks’ performance will indicate improvements in the broader economy.

“We think we’ll see positive overtones as to how the economic recovery is taking hold,” said Moshe Orenbuch, an analyst with Credit Suisse.

In an internal memo, Mr. Pandit was effusive about 2010, predicting that it would be remembered as the year Citigroup turned the corner: