Citigroup (NYSE: C) today announced that it lost $7.58 billion during the final three months of 2009 as consumers continue to struggle to repay loans, also reflecting payback of its government bailout money. Citigroup said $6.2 billion of the loss was tied to paying back $20 billion in money it received from the government.

The New York-based bank has set aside $8.18 billion to cover defaulted loans, or loans that were believed to be defaulted on in the very near future during the quarter. Despite the continuing large number of non-repaying loans, an encouraging sign can be seen as Citigroup’s provision for loan losses declined 10% from the previous quarter and 36% from the same period one year ago, when the credit crisis peaked. Although some signs show improvement, Citigroup CFO John Gerspach noted that the company pushed forward in 2009, it will still face struggles. “While the environment continues to be challenging, we have a strong capital base and client franchise,” he said. The company also noted in a recent press release that it had cut 100,000 jobs during the past year.

Citigroup was the bank hit hardest by the credit crisis and recession, receiving $45 billion in government bailout money. In addition, it may turn out to have the poorest fourth-quarter results among all the big banks, do to its lack of a large investment bank with profitable trading operations that have helped other companies offset their losses from bad loans.

On Friday, JPMorgan Chase & Co. reported a $3.28 billion profit on the strength of its investment banking unit, further indicating what Citigroup’s lack of an investment bank division has done to its bottom line. JPMorgan said it set aside $7.28 billion for failed loans during the fourth quarter, nearly identical to the amount it reserved during the final quarter in 2008. It also warned that it didn’t know when it would be able to stop adding to its loan reserves, indicating that its loan default situation may not be any better, and potentially worse than Citigroup’s.

Citigroup’s Gerspach did say the bank is seeing signs credit might be stabilizing or improving, especially in some of its international businesses.

Citigroup raised $20 billion in new capital during the fourth quarter to repay bailout funds. The government converted $25 billion of the bailout money into a 34% stake in the bank, and said last month it would sell its shares over the next year.

The bank’s stock fell 9 cents to $3.33 during pre-opening trading only to rebound to its previous closing price by mid day. The stock price is perhaps the clearest indication of how hard the company was hit and how far Citigroup fell during the banking crisis and recession; at the stock market’s peak of 14,000 in October 2007, it traded at $45 a share.

Citigroup spent much of 2009 trying to reorganize and streamline its operations in an attempt to return to the consistent profitability it had seen for years prior to this economic downturn. The Company split its operations into two units, Citicorp and Citigroup Holdings. Citicorp, which holds the bank’s primary businesses such as regional consumer banking, generated net income of $1.7 billion during the quarter, and Citigroup Holdings, which is where the bank placed assets not essential to its core businesses operations. This portion of the business has been on the chopping block as Citigroup looks to sell or dismantle the operation which lost $2.5 billion during the October-December period.

According to some reports assets in Citigroup Holdings fell by as much as $70 billion to just over half a billion during the fourth quarter. Over the full year, Citigroup Holdings completed 14 sales, including Smith Barney and Japanese units Nikko Cordial Securities and Nikko Asset Management. The bank lost 33 cents per share during the quarter, which hits analyst’s expectations soundly. For the full year, Citigroup lost $1.61 billion, equaling 80 cents per share. For the year ended 2008 lost $27.68 billion, or $5.61 per share.