Citigroup Inc. (C) on Thursday said quarterly profit rose 12 percent as consumer and investment banking grew, but said it sees 2005 profit at the low end of Wall Street estimates due to rising interest rates and other factors.

Citigroup, the world's largest financial services company, increased its quarterly dividend 10 percent.

Fourth-quarter net income rose to $5.32 billion, or $1.02 per share, from $4.76 billion, or 91 cents per share, a year earlier.

Analysts polled by Reuters Estimates on average forecast $1.01 per share.

Results included a $244 million charge to close Citigroup's private bank in Japan, and a $131 million reserve for the expected settlement of a U.S. regulatory probe into a transfer agent unit created to serve Smith Barney mutual funds.

New York-based Citigroup also released $605 million from reserves it had set aside for bad loans.

Revenue rose 9 percent to $21.9 billion, topping analysts' forecast of $21.5 billion.

Looking ahead to 2005 earnings, Chief Financial Officer Sallie Krawcheck (search) on a conference call said results would be hurt by the impact of rising interest rates, taxes and an expected decline in the amount of loan loss reserve releases.

"I'm more comfortable with the bottom end of analyst estimates than the top end," she said.

Analysts polled by Reuters Estimates on average forecast 2005 profit in a range of $4.20 to $4.57 per share with an average of $4.35 per share.

Citigroup shares fell 51 cents, or 1.1 percent, to $47.50 on the New York Stock Exchange (search).

Chief Executive Charles Prince (search) is trying to repair Citigroup's reputation.

The company last year set aside $4.95 billion for WorldCom Inc. (search) and other lawsuits, came under European regulatory scrutiny after placing a big bond trade that roiled markets, and was ordered to close the Japanese private bank.

"It's a key priority for this management team to take open issues off the table, to close out issues," Prince said on the call. "It pains me to have to spend the money to do it."

Citigroup, known for keeping costs down, said fourth-quarter operating expenses rose 19 percent to $12 billion. It cited higher bonuses for investment bankers, legal bills, currency fluctuations, acquisitions and business expansion.

Consumer profit rose 7 percent to $3.1 billion on revenue of $13.2 billion. Income from credit cards rose 27 percent to $1.44 billion, retail banking rose 7 percent to $1.13 billion, and consumer finance rose 22 percent to $584 million.

Profit at corporate and investment bank rose 32 percent to $1.69 billion. Capital markets and banking income rose 14 percent to $1.26 billion, and transaction services income rose 47 percent to $261 million.

Wealth management profit fell 75 percent to $97 million, largely because of a $129 million loss at the private bank. Investment management profit fell 11 percent to $254 million.

The bank has $1.48 trillion of assets, up 17 percent.

The quarterly dividend will rise to 44 cents per share from 40 cents. It will be paid on Feb. 25 to shareholders of record as of Feb. 7.