NEW YORK -- Citigroup's (C.N) second-quarter profits fell 3 per cent from a year earlier as the bank had to set aside more money to cover souring loans, especially in its credit card business.

The New York-based bank earned US$3.87 billion, or US$1.28 per share, compared with US$3.99 billion, or US$1.24 per share, in the same period a year earlier. The results still beat analysts' forecasts of US$1.21 a share, according to FactSet.

Like its rival JPMorgan Chase, Citigroup saw a sizeable increase in interest income. The Federal Reserve has been steadily raising interest rates, which has allowed banks to charge more to borrow. Citi had net interest revenue of US$15.20 billion, up 6 per cent from a year earlier.

At the same time, Citi had to write off more bad loans in the quarter, mostly in credit cards. Citigroup has been expanding its credit card business, similar to its rivals.

Citi's global consumer banking division earned US$1.13 billion, down 12 per cent from a year earlier.

The bank's investment and trading operations had a better quarter. Citi's institutional clients group earned US$2.76 billion, up 6 per cent from a year earlier. While trading revenues were down across the board, Citi saw a jump in fee income from advising companies in its investment bank.