Citigroup said yesterday its third-quarter profits rose 20 per cent to a record $4.7 billion (€4 billion), as improving credit quality helped it overcome difficulties in Japan and Argentina.

The group employs 1,200 at its International Financial Services Centre operations in Dublin.

The report contained more than the usual amount of "noise", in the words of Mr Sandy Weill, who stepped down as chief executive during the quarter but remains as chairman of the group.

For example, Citigroup's profits were boosted by the release of $200 million of tax reserves held at the Associates First Capital subprime lending operation acquired by the financial group in 2000.

However, the overall impression was that Citigroup - like other big US banks that have reported earnings - was being helped by an improving economy, particularly in the US.

The 20 per cent rise in net income was even more impressive considering that last year Citigroup's operating income included figures from Travelers Property Casualty, which was being spun off.

Income from continuing operations was up 27 per cent in the quarter this year.

Revenues were up 10 per cent from last year to a record $19.4 billion, reflecting gains in retail banking, life insurance and annuities, private banking and proprietary investments. Expenses, a traditional area of focus under Mr Weill, rose 14 per cent, but Citigroup said that reflected its policy of basing pay on revenues adjusted for credit losses.

The improvement in credit quality enabled Citigroup to scale back its provisions for credit losses to $1.61 billion from $2.69 billion the previous year.

Overall consumer income was up 14 per cent to $2.5 billion.

However, declining income from consumer finance operations in Japan pushed down consumer finance income overall by 13 per cent to $467 million.