Citigroup, the largest US bank and financial services company, saw its profits fall by more than one-third during the last three months of 2002.

The group paid $1.55bn in charges to settle a stock research scandal and to cover potential loan losses and Enron-related litigation.

The bank faced court cases following allegations that it issued misleading stock research and that it helped disgraced energy giant Enron to disguise its loans.

During 2002, our company faced several significant challenges Sandy Weill Citigroup chairman

Its shares fell by 30% during the year as investors feared a serious fall-out from the investigations.

But the bank chose to settle out of court.

The result was that net profits fell by 37% to $2.4bn (�1.5bn) during its fourth quarter, even though revenues were slightly higher.

"During 2002, our company faced several significant challenges," said Citigroup Chairman Sanford "Sandy" Weill.

He cited "continued weakness in global markets, record bankruptcies in the developed world, [and] political and economic upheaval in a number of countries" as the reasons.

He also referred to "intense scrutiny" of the bank's business practices.

'Tremendous confidence'

Despite the sharply lower profits and a negative climate for business banking in the US, the firm said it was still confident it could deliver double-digit income growth this year.

"We begin 2003 with tremendous confidence in the future," said Mr Weill.

For the whole of 2002, the bank saw its profits increase by 8% to a record $15.3bn.

Revenues rose by 7% to $75.8bn.

"It was right in line with our estimate," said Lehman Brothers analyst Brock Vandervliet.

"The global corporate and investment bank wasn't quite as strong as we had hoped in terms of revenue and net income performance but the consumer business was a bit stronger than what we'd been looking for."

Profits at Citigroup's consumer unit, which includes credit cards and retail banking, rose 26% to $2.37bn in the fourth quarter.

But the corporate and investment bank saw a $344m loss in the quarter, after a $1.3bn charge for the research settlement and Enron litigation.

Shares in Citigroup fell 66 cents to $36.14 on Tuesday.