Citigroup provided further evidence of the adverse impact of rising short-term interest rates on US banks by reporting a 3 per cent decline in underlying earnings to $5 billion (€4.1 billion) in the fourth quarter.

Chuck Prince, chief executive, said the world's largest financial services company had seen good customer volume growth and strong revenue increases, including 13 per cent underlying growth outside the US. But this was offset by "a challenging interest rate environment and competitive pricing conditions globally".

Revenue growth slowed to 3 per cent in the fourth quarter, compared with a 5 per cent increase for the year to $83.6 billion. For the full year, earnings from continuing operations were $19.8 billion, down 1 per cent on 2004 excluding the $5 billion litigation provision that year.

The fourth-quarter figures benefited from a $600 million pre-tax release from the reserve for legal actions related to Citigroup's underwriting of securities for WorldCom, following a recent favourable judgment.