Citigroup (C) reported an 11% decline in fourth-quarter earnings that missed Wall Street expectations, as Citi Holdings assets continued to decline and the company took a hit from the ongoing European debt crisis that pummeled capital markets trading. 

Shares of Citi were down about 3.5% to $29.67 pre-market.

The third-largest U.S. bank by assets said it earned $1.2 billion, or 38 cents a share, compared with $1.3 billion, or 43 cents a share, in the year-earlier period. The earnings fell short of average analyst estimates in a Thomson Reuters poll of 49 cents.

Revenue for the three-month period was $17.2 billion, down 7% from a year ago and widely missing the Street’s view of $18.54 billion.

The brokerage and loan provider blamed the sales decline on the ongoing reduction in Citi Holdings assets, which decreased 25% year-over-year. The credit card segment’s revenue plunged 30% in the quarter to $2.8 billion.

The company also blamed lower sales in its securities and banking segment, which were down 29% year-over-year excluding one-time items, and sharp drops in both equity markets and investment banking revenues, excluding special items, which fell 71% and 45%, respectively.

Those declines were partially offset by a $2 billion improvement in the cost of credit from the prior year, which fell 41% to $2.9 billion in the fourth quarter due to a 40% decrease in net credit losses to $4.1 billion.

Citi CEO Vikram Pandit said the macro environment continues to impact the capital markets, but the company “will continue to right-size” the business to “match the environment.”

"With Citi Holdings assets at 12% after the transfer of retail partner cards to Citicorp, we are increasingly focused on driving earnings through our core franchise and beginning to return capital to our shareholders this year," he said.

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