Citigroup Inc.'s Mexican banking arm, Grupo Financiero Banamex, reported an 18% increase in first-quarter profit as loan growth and a decline in loan-loss provisions more than offset a slump in trading income.

Its profit was 7.06 billion pesos ($568.7 million), up from 5.98 billion ($478 million) in the first quarter of 2009, according to financial statements posted on Banamex's website.

Banamex, which controls Mexico's No. 2 bank and is a major profit center for Citigroup, reinvested all of its first-quarter earnings in the company.

The group's net interest income rose 14.3%, to 14.48 billion pesos ($1.16 billion) as a decline in the cost of funding compensated for lower interest rates on loans.

Bad-loan provisions fell to 2.9 billion pesos ($232 million), from 5.44 billion ($435.2 million) the previous quarter and 7.33 billion ($582.2 million) in the year-earlier period.

Banamex reported a loss in its volatile securities trading business of 90 million pesos ($7.2 million) for the quarter, compared with a gain of 5.42 billion ($433.3 million) in the first quarter of 2009.

Banamex's performing loan portfolio rose 27.4%, led by growth in corporate, commercial, mortgage and public-sector lending. Consumer loan balances dipped 2.7%.

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