Amid all the noise in a typically messy quarter for Citigroup Inc. lay a beacon of hope for bankers everywhere: a shrinking pile of loans gone bad.

Net credit losses at the embattled company were $7.1 billion in the fourth quarter, a data point still earning wariness but nonetheless heartening next to the $8 billion reported in the previous quarter, and the $8.4 billion in the quarter before that. Total credit costs at Citi, including reserve builds for loan losses and policyholder benefits and claims, fell 10% from the third quarter, to their lowest level since mid-2008.

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