UPDATE 8-Citigroup results top forecasts on accounting gain

* Cost-cutting and trading cited for smaller Q1 loss

* Revenue doubles to $24.79 billion, topping forecasts

* Joins other big banks in showing improvement

* Results include $2.5 billion gain from accounting rule

* Citigroup shares fall 9 percent (Recasts, updates shares)

By Jonathan Stempel and Dan Wilchins

NEW YORK, April 17 (Reuters) - Citigroup Inc (C.N) reported better-than-expected results as an accounting benefit for distressed companies, cost-cutting and improved trading results helped offset red ink from consumer lending and credit cards.

The third-largest U.S. bank, bailed out with $45 billion of taxpayer money, joined Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N) in signaling that massive government efforts to jump-start the ailing economy are helping boost bank earnings.

"The bulk of the writedown in Citigroup's toxic assets are probably behind them," said Marshall Front, chairman of Front Barnett Associates LLC in Chicago, which invests $500 million and is buying Citigroup stock. "But there are obviously huge hurdles ahead with respect to the credit cycle that will provide strong headwinds."

Citigroup's quarterly loss narrowed to $966 million, or 18 cents per share, from $5.19 billion, or $1.03, a year earlier. According to Reuters Estimates, the loss was 12 cents per share before one-time items. On that basis, analysts had expected a loss of 30 cents per share.

Excluding the impact of preferred stock, Citigroup said quarterly earnings were $1.59 billion, its first profit on that basis since the third quarter of 2007. The New York-based bank lost $37.5 billion in the next five quarters.

Its revenue doubled to $24.79 billion, topping the average $21.73 billion forecast.

"Perhaps the banking sector crisis is bottoming," said Richard Hunter, head of U.S. equities at Hargreaves Landsdown in London.

Citigroup Chief Executive Vikram Pandit has been slashing costs and trying to unload weak businesses and troubled or toxic assets that caused many of the bank's difficulties.

ACCOUNTING "BLIP" MAY HAVE HELPED

Citigroup also said it would delay a planned exchange of $52.5 billion of preferred shares into common stock, but would not change the terms.