Citigroup Inc., the third-biggest U.S. bank, reported a surprise profit of $468 million for the third quarter, helped by a $582 million tax benefit and bond- trading revenue that beat analysts’ estimates.

Profit, which included a $2.9 billion writedown on the Smith Barney brokerage, was 15 cents a share, and compared with $3.77 billion, or $1.23 a share, a year earlier, the New York- based bank said today in a statement. Excluding one-time items and the tax benefit, profit was $1.06 a share, beating the 97- cent average estimate of 25 analysts surveyed by Bloomberg.

Chief Executive Officer Vikram Pandit, 55, is cutting jobs and disposing of unwanted assets, including a 49 percent stake in Smith Barney, as he seeks to return capital to shareholders and comply with new regulations on buffers against losses. Revenue from fixed-income trading surged 63 percent excluding accounting adjustments after tumbling last year during the European sovereign-debt crisis.

“Citigroup remains a company that has been steadily profitable for some period of time,” Todd Hagerman, an analyst with Sterne, Agee & Leach Inc. who rates the shares neutral, said before earnings were released. “They have a lot going for them in terms of their relative balance-sheet strength as well as the consistency of their earnings.”

Citigroup, which has gained 32 percent this year in New York trading, rose to $35.40 at 8:16 a.m. from $34.75 on Oct. 12.

Bond Trading

Including one-time items, analysts estimated Citigroup would post a loss of $777 million. The tax benefit was related to the resolution of “certain tax-audit items,” the bank said.

Revenue excluding the Smith Barney writedown and accounting adjustments rose 3 percent to $19.4 billion. Expenses declined 2 percent to $12.2 billion.

Fixed-income revenue rose to $3.7 billion, excluding $672 million of so-called credit-valuation adjustments tied to the firm’s bond spreads. The increase resulted from “significantly higher trading revenues in credit-related and securitized products, as well as strong performance in rates and currencies,” the bank said in the statement.

Moshe Orenbuch, an analyst with Credit Suisse Group AG, had estimated fixed-income trading revenue of $2.96 billion. David Trone, a JMP Securities LLC analyst, predicted $3.11 billion.

Stock Trading

Stock trading, run by Derek Bandeen in London, posted a 76 percent increase to $510 million.

Investment-banking revenue gained 26 percent to $926 million, with increases in fees from underwriting shares and bonds and advising on mergers.

“Our core businesses showed momentum during the quarter as we increased lending and generated higher operating revenues,” Pandit said in the statement.

Pandit agreed in September to sell Citigroup’s stake in the Smith Barney joint venture to its partner, Morgan Stanley, after the two firms argued over the brokerage’s worth. The deal forced Citigroup to write down the value of its stake.

Citigroup rose 19 percent during the quarter, more than any other lender in the 24-company KBW Bank Index. Bank stocks gained as the Federal Reserve’s effort to stimulate the economy boosted profit at lenders, according to an Oct. 1 note from KBW Inc. analyst David Konrad. The Fed said in September it would buy $40 billion more in mortgage securities each month.

Europe Crisis

Citigroup’s trading revenue tumbled last year amid market turmoil caused by the European sovereign debt crisis and concerns that the global economy was weakening. While trading volumes remain as much as 40 percent below “peak levels,” Wall Street firms gained from higher asset prices and less volatility, Goldman Sachs Group Inc. analysts said this month.

Citigroup’s third-quarter profit compared with a $5.71 billion profit reported last week by JPMorgan Chase & Co., the biggest U.S. bank. Wells Fargo & Co., the fourth-biggest lender, said profit was $4.94 billion.

Bank of America Corp., the second-biggest, will probably post a $287.3 million loss on Oct. 17, according to the average estimate of 8 analysts surveyed by Bloomberg.