The fact Citigroup (NYSE:C) handedly beat the expectations of analysts grabbed investors' attention, but a dive through the earnings reveals a number of worrisome realities.

A glance at the headlines shows something quite interesting when Citigroup reported its earnings this week:

  • Citi profit helped by better-than-expected fixed-income trading (Reuters)
  • Citigroup profit, revenue top estimates (MarketWatch)
  • Citigroup's Earnings Good News For Bank Stocks As Trading Revenue Better Than Expected (Forbes)

As a result, the stock was up nearly 3.5% in the hours that followed the announcement and corresponding conference call. But too many missed three troubling things from its second quarter results.

Credit is not improving
Whether it's Wells Fargo (NYSE:WFC) or other banks, one of the major ways banks everywhere have improved their bottom lines is by reducing what they expect they will lose on loans, known as provision for credit losses. Yet while the expected losses are down through the first six months of the year at Citigroup, they are nowhere near the gains seen by Wells Fargo:

Source: Company Investor Relations.

As you can see, not only does Wells Fargo expect to lose sizably less from its loans, that gap has only continued to widen relative to Citigroup through the first half of the year. Its losses are down by more than 70%, whereas Citigroup has only seen its decline by 17%.

Plummeting consumer banking business
Many expected declining results from the bond and equity trading operations at Citigroup, but what also was troubling was declining results from its consumer operations as well, as its bottom line income fell 14% to $1.6 billion.

You may think this was the result of fewer mortgages written in America -- which is true, as its volume fell from $17.2 billion to $6.2 billion, a dip of 64% -- but its turns out its North American operations just saw its total income decline by just 1% thanks to improved income from its credit card business. Instead all the other areas of its business saw their income plummet:

Source: Company Investor Relations. 

The company noted its revenues were up by 1% after excluding for the impact of changing currency valuations, but its expenses and its cost of credit were up a significantly, rising 12% and 10%, respectively. While part of this was driven by charges driven by its repositioning in Korea, it also noted its net credit loss rate -- what it actually lost on loans -- rose 19% to $711 million as a result of "portfolio seasoning in Latin America."

All of this is to say, its distinctly global consumer banking operations had a troubling three months.

A trend that isn't admirable
And the final thing that likely escaped the eye of many was the trend from its massive credit card business, which had $1.2 billion in income. While its open accounts grew 9% over the last year to stand at 140.3 million, its loans rose by just 4%.

As a result, a calculation of the average balance of its accounts fell by 5%. And while 5% doesn't sound like a lot, it would've meant an additional $7.6 billion in loans it earns 13.6% on. Or $250 million to its bottom line in this quarter alone.

It's too early to tell if this is true of all banks or just Citigroup. But if it finds itself alone in this trend, it could spell even lower interest income for the bank.

Looking ahead
Some are very high on Citigroup, and others -- like myself -- are not. And while I'm more than open to changing that opinion, nothing from its results from the first quarter did anything to change my perspective.