UPDATE 8-Citi posts per-share loss, investment banking weak

* Q3 shr loss 27 cents; Wall St view loss 38 cents

* Credit losses $8.0 billion vs $4.9 bln a year ago

* Securities and banking revenue down 33 pct

* Total assets rise 2 pct from Q2 to $1.89 trillion

* Shares close down 5 percent (Recasts lead, adds detail)

By Dan Wilchins

NEW YORK, Oct 15 (Reuters) - Citigroup Inc (C.N) posted a quarterly per-share loss as credit losses shrank to a still-hefty $8 billion and its commercial and investment banking revenue weakened.

The loss per share was narrower than analysts expected but still underlined how far the bank -- which is one-third owned by the U.S. government after three bailouts -- has to go to catch up with stronger rivals like JPMorgan Chase & Co (JPM.N).

"You can see how they're making progress, but there's a lot more work to do, they don't look as good as Goldman Sachs right now," said Matt McCormick, portfolio manager, Bahl & Gaynor Investment Counsel Inc. Citigroup's shares closed down 5 percent at $4.75.

Citigroup's securities and banking revenue declined by a third from the same quarter last year to $4.9 billion, while JPMorgan and Goldman Sachs Group Inc (GS.N) both posted big gains in banking.

That decline came as JPMorgan Chase and Goldman Sachs this week posted big increases in investment banking revenue, driven by bond trading.

Goldman had a strong trading performance in areas like corporate debt and stock options. Citigroup cited those same products as sources of weakness.

On a conference call, Chief Financial Officer John Gerspach noted that many troubled fixed-income assets at Citigroup are in a special asset pool, and their rising value would not help results in the securities and banking business even if they do bolster the bottom line.

Citigroup posted a net loss to shareholders of $3.2 billion, or 27 cents a share, compared with a loss of $2.9 billion, or 61 cents a share, a year earlier.

Analysts' average forecast was a loss to shareholders of 38 cents a share.

COMPLICATED RESULTS

Analysts have struggled to determine when Citigroup will start posting profits from its main businesses. Some have forecast a return to "core profitability" as soon as early next year.

Citigroup has posted more than $100 billion of writedowns and consumer credit losses since the credit crisis began. It posted more than $37 billion of net losses between the fourth quarter of 2007 and the fourth quarter of 2008.

In every quarter this year, the bank has reported net income, but through one-time gains and accounting items.

In the third quarter, the bank posted net income of $101 million after a $1.12 billion tax benefit. But it reported a $529 million loss from continuing operations before taxes. The bottom line for shareholders was negative, including one-time losses from converting preferred shares into common stock.

Results were further muddied by accounting losses that resulted from the bank's bonds performing better.

"It can give you brain damage trying to figure this out," said Walter Todd, portfolio manager at Greenwood Capital Management in Greenwood, South Carolina. "With all the other opportunities out there in the financial space, I don't know why you'd spend the time to try to understand what the heck's going on here, unless you can take a lot of risk."

Citigroup suffered $8 billion of credit losses, compared with $4.9 billion in the same quarter last year and $8.4 billion in the second quarter of 2009.

The bank set aside less for bad loans than in the year-ago quarter. That may make sense because the bank's assets also declined, and net credit losses declined from the second quarter. The bank said it has enough to cover consumer loan losses for the next 13.3 months, the highest loss coverage level in at least two years.

The bank's inability to post earnings from its main businesses has made some analysts impatient. Others argue that by the time the bank is profitable, its shares will no longer be cheap. The shares trade at about three-quarters of their book value, while competitors trade above theirs.

A key source of uncertainty for Citigroup is the performance of its U.S. credit card and mortgage loans, which have suffered and may be stabilizing.

"Clearly, U.S. consumer credit remains the number one issue affecting our near-term results," Chief Executive Vikram Pandit said on a conference call with analysts.

Net revenue at Citigroup rose 25 percent from a year earlier to $20.39 billion.

Total assets rose 2 percent from the second quarter, to $1.89 trillion.

Pandit has struggled to fix a bank formed through decades of acquisitions that resulted in a hodgepodge of fiefdoms. Citigroup earlier this year separated the businesses it wanted to keep, which it calls Citicorp, from the units and assets it aims to shed, which it calls Citi Holdings.

On a conference call, CFO Gerspach said the bank had "the capacity to begin to repay TARP" and that it was just a question of when.

Citigroup shares are down roughly 30 percent this year, compared with a rise of about 10 percent rise in the KBW Bank index .BKX and a nearly 50 percent advance by shares of Citigroup rival JPMorgan Chase & Co. (Reporting by Dan Wilchins; Editing by John Wallace)