In a conference call on Friday to review Citigroup's (NYSE:C) year-end performance, CEO Chuck Prince had a combination of good and bad results to report to investors and analysts. The mixed news probably reminded many listeners how difficult it is for all of the cylinders at this complex financial-services company ever to fire at once. Many of Prince's critics were undoubtedly further encouraged in their calls for breaking up Citigroup's varied operations.

Net income in the fourth quarter measured $5.13 billion, or $1.03 per share, a decrease of more than 25% from the previous year. Charges related to the repositioning of Citigroup's Japanese consumer-finance unit, a development triggered by the passage in December of unfavorable legislation, contributed to the decline. For the full year, Citigroup posted net income of $21.5 billion, a 12% decrease from 2005. On an EPS basis, earnings for the full year fell from $4.75 in 2005 to $4.31 in 2006, a 9% drop-off. Discontinued operations largely account for the year-over-year decline; the bank's earnings from continuing operations did post a modest 7% increase in 2006.

Citigroup's global consumer business unit earned $12.1 billion in 2006, more than half of the bank's total net income. The unit's profits grew by 11% over the previous year, and revenue growth was just 9%. That unremarkable performance reflects the challenge that the bank as a whole faces -- namely, that the successful results from one product or regional group frequently become obscured by the problems another group encounters in Citigroup's vast organization. The dynamic manifested itself in the consumer business unit's mediocre growth. That, in turn, happened in part because double-digit earnings declines from U.S. commercial and international consumer finance weighted down soaring 36% earnings growth from the international retail banking franchise.

Prince maintains high expectations for the global consumer unit's long-term growth rates, with revenue from international businesses forecast to grow at double-digit rates and revenue from U.S. businesses expected to grow at mid-single-digit rates. He explains the disappointing results in 2006 by pointing to events that could not be anticipated and are unlikely to recur, such as the change in Japanese consumer-finance laws, which capped the interest rate that finance companies can charge for consumer loans and caused Citigroup to recognize $415 million in related charges in the fourth quarter.

Corporate and investment banking, Citigroup's second-largest division, contributed $7.1 billion to the bank's net income, a 3% increase in a year when active capital markets were helping investment-banking rivals such as Goldman Sachs (NYSE:GS) and Bear Stearns (NYSE:BSC) earn record profits. Prince defends the investment-banking division's competitiveness by highlighting the unit's leadership position in various deal tables, and he explains that expense growth and underinvestment in certain hot product areas, such as commodities trading, caused the unit's profit growth to lag the industry's average. The unit's performance was also hurt by comparisons with the previous year, when the bank received one-time benefits that inflated profits.

Assessing Citi
Many investors see a pattern in the series of discrete events that have undermined Citigroup's profitability during the years of Prince's reign as CEO. Specifically, they consider the bank as having grown too big to be managed effectively; they favor the more focused business models followed by Citigroup's rivals JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC). Both companies have generated better returns for shareholders in recent years.

Prince has responded to investors' concerns by charging Robert Druskin, formerly the head of Citigroup's investment bank, with responsibility for reducing the company's expenses. He is also moving CFO Sallie Krawcheck to take over leadership at the global wealth management unit. Most analysts who follow Citigroup applauded that decision, which was announced yesterday.

But the results of Citigroup's international expansion will ultimately determine Prince's success. Citigroup is far ahead of its U.S. banking rivals in developing business opportunities in international markets, which promise much higher growth rates for financial-services companies than the relatively mature U.S. markets can offer, even though large foreign investments (such as Citigroup's stake in China's Guangdong bank or Turkey's Akbank) do take time to pay off. In the meantime, Citigroup's anemic performance is creating doubts among shareholders about the wisdom of operating so many business units under the one umbrella at Citigroup.

At a recent share price of $54, Citigroup stock trades at a price-to-earnings multiple comparable to those of Bank of America and JPMorgan, and Citigroup stock trades at a slight premium in terms of its price-to-book-value multiple. Investors who believe Prince can maintain the support of his board until the bank's international efforts can succeed might want to bet on the stock now. Based on the track record of recent shareholder returns, however, Bank of America and JPMorgan Chase look like more reliable investments.

Related links:

Bank of America and JPMorgan Chase are Income Investor recommendations. Take a free trial to see the entire Income Investor portfolio, which is beating the market by more than 8%.

Fool contributor Michael Leibert welcomes your feedback. He does not have a position in the stocks of any of the companies mentioned above. The Fool has a disclosure policy.