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Citigroup reported a painful fourth-quarter loss of $7.6 billion Tuesday, even amid signs that the worst may be behind the troubled financial giant.

Last month’s decision to refund $20 billion in outstanding bailout funds to American taxpayers was the primary reason behind the bank’s loss.

The move, which helped alleviate some of the government scrutiny the bank has had to endure over the past year, including questions on how it compensates its top executives, resulted in Citigroup reporting a loss of 33 cents on per share basis.

That was in line with what Wall Street was expecting from Citigroup, although the company said it still would have reported a loss of $1.4 billion if it did not take a big charge to pay back the government.

Citigroup also said it spent $25 billion to compensate its employees in 2009, which broke down to roughly $90,000 per employee. A year ago, the bank paid $31.1 billion to its employees, but Citigroup had far more many workers in 2008. The bank sold several divisions in 2009.

Tuesday’s results bring to a close a rather difficult year for the New York City-based bank that included talk of possible government nationalization and its stock price tumbling below $1 a share.

Even though many of Citigroup’s peers returned to profitability last year, the bank lost $1.6 billion. Still, that was far less than the $27.7 billion it lost just a year earlier, one of the toughest period’s in the company’s nearly 200-year history.

Citigroup CEO Vikram Pandit, who has tried to lead the company back to profitability over the past two years, called 2009 a period of “enormous progress.”

“As we enter 2010, we are strongly capitalized, significantly more efficient, and are executing on a clear strategy that is focused on clients,” he said in a statement.

The bank also highlighted some encouraging signs within its massive loan portfolio. Credit losses fell to $7.1 billion during the quarter, down $800 million from the previous three-month period.

Citigroup also set aside less money for bad loans during the quarter, suggesting that related losses may soon start to moderate.

“Provisions and charge-offs were lower than we expected, suggesting that [Citigroup's] outlook for its loan book has improved,” wrote Stuart Plesser, senior bank equity analyst with Standard & Poor’s, in a note to clients after Citigroup’s results were released.

But much of that improvement was outside the United States, particularly in countries like Korea and Mexico, just two of the countries where Citigroup operates worldwide.

Pandit noted however that the bank remains particularly concerned about loans tied to the American consumer, particularly with so many individuals out of work and the recovery in the housing market still tentative.

“U.S. credit in my view comes down mostly to the mortgage portfolio,” said Pandit during a conference call. “That is what we are watching most carefully.”

Much of those so-called troubled assets however remain within the company’s Citi Holdings division, which was created a little more than a year ago as a dumping ground for assets it has been looking to get rid off. Losses within that division widened to $2.4 billion during the quarter.

But things were hardly rosy either within the company’s Citicorp unit, which include the businesses the company has staked its future on. Sales at its consumer, investment banking and transaction services businesses declined from the third quarter.

Revenues at Citi’s massive North American credit card business, for example, fell largely due to a new series of federal rules aimed at making banks’ credit card practices more consumer friendly.

Despite the less-than-stellar results, Citigroup (C, Fortune 500) shares gained more than 3% in afternoon trading Tuesday, rebounding from losses earlier in the day after the results were first announced.

The company is the second major financial firm to report its fourth quarter results. So far, investors have been largely disappointed.

Although JPMorgan Chase (JPM, Fortune 500) posted a better-than-expected profit on Friday, the stock fell due to cautious comments about the economy from CEO Jamie Dimon. The stock was down again on Tuesday.

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Intel Corp. posted a fourth-quarter profit that trounced Wall Street expectations Thursday, as the world’s largest microchip maker became the first major technology company to report results for the period.

The Santa Clara, Calif.-based company reported a profit of $2.3 billion, or 40 cents per share, during the final quarter of 2009. The income was nearly 10 times higher than the $234 million, or 4 cents per share, that Intel reported for the fourth quarter of 2008.

Analysts polled by Thomson Reuters forecasted earnings of 30 cents per share.

“Our ability to weather this business cycle demonstrates that microprocessors are indispensable in our modern world,” said Intel president and chief executive Paul Otellini, in a statement.

Intel’s quarterly sales rose to $10.6 billion, 28% higher than the $8.2 billion in the same period of 2008. The revenue also topped analysts’ forecast of $10.2 billion.

Revenue in the PC client group rose 10% in the quarter, in line with analysts’ predictions. But an upside analysts weren’t expecting came from a 21% jump in sales in the data center group, which includes processors for servers.

For the full year, Intel posted a profit of $4.4 billion, or 77 cents per share, on revenue of $35.1 billion. That compared to earnings of $5.3 billion, or 92 cents per share, on revenue of $37.6 billion in 2008.

“In 2009, Intel had the best low-cost solutions with its Atom chip, which carried them through the year,” said Kevin Cassidy, analyst at Thomas Weisel Partners.

But the encouraging news to Cassidy was in Intel’s guidance going forward.

“Intel is feeling confident about corporate IT (information technology) spending coming back, and they have the best high-end server solutions,” he said. “As corporations upgrade their data centers this year, Intel will benefit. Their timing has been perfect.”

For the current quarter, Intel expects revenue between $9.3 billion and $10.1 billion. Analysts have forecast it to range between $9 billion and $10 billion.

Despite the upbeat report, the company still faces a legal battle this year. After Intel and rival chipmaker Advanced Micro Devices agreed on a $1.25 billion settlement on their legal feuds over antitrust violations and patent disputes, the Federal Trade Commission filed a lawsuit against Intel in December for alleged anticompetitive practices.

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Shares of Japan Airlines were flooded with sell orders yesterday on growing expectations the carrier is headed for bankruptcy and a delisting from the Tokyo exchange.

The sell-off, set to wipe out nearly US$900mil in market value from JAL, came despite an announcement from American Airlines that it had sweetened its investment offer by US$300mil to US$1.4bil to keep JAL from forging ties with Delta Air Lines.

A state-backed fund now weighing whether to support the carrier is planning to have it file for bankruptcy next week, provided banks agree to waive about 350 billion yen (US$3.80bil) in debt, sources have told Reuters.

Kyodo news agency said on Tuesday that Japan’s top three private banks – Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group – had agreed to the bankruptcy plan.

“With all the media reports there’s a lot of talk going around about JAL delisting or staying listed,” said Toshihiko Matsuno, a senior strategist at SMBC Friend Securities.

“Investors don’t know what to think any more,” he said.

JAL, weighed down by US$16bil in debt and mired in losses, applied in late October to the Enterprise Turnaround Initiative Corp of Japan (ETIC), a body of restructuring specialists that can tap state-backed funding to bail out ailing companies.

The ETIC plans to inject about 300 billion yen in fresh capital into JAL, provided it files for bankruptcy and creditors agree to waive around 350 billion yen in debts, sources told Reuters last week.

The ETIC is eyeing some time between January 19 and January 22 for the carrier to file for bankruptcy and for the ETIC to officially announce its plans to offer its support.

Shares of JAL were untraded due to a flood of sell orders at 37 yen, down 45% from Friday’s close. Japanese markets were closed for a national holiday on Monday.

JAL’s market value had sunk below US$2bil as of Friday’s close, from more than US$6bil a year ago and compared with smaller rival All Nippon Airways’ US$7.7bil.

Meanwhile, Japan Airlines Corp said yesterday that two-thirds of its retirees had agreed to proposed pension cuts, clearing a hurdle in its push to cut its pension shortfall and qualify for an injection of public funds.

The airline needed the agreement of two-thirds of current employees and retirees for the cuts so it can reduce a pension shortfall estimated at 331 billion yen (US$3.60bil) at the end of March.

A JAL spokesman said the carrier received notifications of agreement from 5,991 out of 8,936 retirees.

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