Citigroup rose in New York trading after earnings beat analysts’ estimates and Chief Executive Officer Vikram Pandit said the bank may return capital to shareholders in 2012.

Citigroup climbed 22 cents, or 5.6 percent, to close at $4.17 in New York Stock Exchange composite trading. The shares, which have gained 26 percent this year, advanced yesterday after the New York-based company said third-quarter net income was $2.17 billion, or 7 cents a share. Ten analysts surveyed by Bloomberg estimated per-share earnings of 5 cents.

A reduction in reserves brings Pandit, 53, one quarter closer to achieving his first annual profit after losses in 2008 and 2009 that totaled $29.3 billion. A return of capital would be Citigroup’s first reward for shareholders since the bank, the nation’s third-biggest, cut its dividend in 2008 and then eliminated it in February 2009.

“They’re going in the right direction,” said David Hendler, an analyst with CreditSights Inc. “It’s a good goal and they’re working towards that goal.”

Losses from bad loans declined to $7.66 billion from $11 billion as Citigroup benefited from fewer consumers falling behind on loan payments. The bank reduced loan-loss reserves by $1.99 billion.

Earnings rose from a profit of $101 million in the same period a year earlier.

The share price gain was the biggest in the 24-company KBW Bank Index.

A return on capital would depend on the requirements of the Basel Committee on Banking Supervision when they are completed, Pandit told analysts on a conference call.