NEW YORK (CNN/Money) - Citigroup Inc. reported higher third-quarter earnings Tuesday, edging Wall Street expectations even as it operated under a cloud of uncertainty related to a string of controversies, investigations and lawsuits.

The world's No. 1 financial services company earned $3.79 billion, or 74 cents per share, in the quarter, excluding special items, up from $3.25 billion, or 62 cents before special items, a year ago. Wall Street analysts, on average, expected Citigroup to earn 73 cents per share, according to earnings tracker First Call.

Included in the earnings, under the category of "proprietary investment activities," was the $323 million after-tax profit from the company's sale of a building at 399 Park Avenue in New York.

Revenue rose to $18.8 billion from $17 billion a year ago. Analysts expected revenue of $18.6 billion, according to First Call.

"We did have an incredible quarter in very difficult times," CEO Sanford Weill said in a conference call. "This is a great example of what recurring and predictable earnings can do, even in bad times. We think we're building a base for a very strong future."

Citigroup has managed to weather a prolonged downturn for financial services firms, driven by a weak economy and tumbling stock prices.

In the third quarter, strength in Citigroup's consumer business offset weakness in its corporate and investment banking units. Profit at its global consumer group rose 13 percent to $2.22 billion, while earnings at the corporate and investment bank fell 7 percent to $1.20 billion.

The corporate business also suffered from a $710 million provision for credit losses, compared with $498 million a year ago, a result of writedowns on telecommunications and Argentina-related loans.

"Investors should be broadly reassured by the results, as Citigroup has maintained strong momentum in its consumer and investment management franchises and continues to differentiate itself in its corporate business," Merrill Lynch analyst Judah Kraushaar said in a note. "Also, there were no substantial negative surprises on credit quality."

Investors seemed to agree, sending shares of Citigroup (C: up $3.83 to $34.14, Research, Estimates) nearly 12 percent higher in early trading.

But the company still is trying to dig out from under a mountain of trouble.

On Monday, the Wall Street Journal said New York State Comptroller Carl McCall sued the company last week, alleging that analysts at the firm's Salomon Smith Barney unit kept an overly positive rating on shares of bankrupt telecommunications provider WorldCom Group in order to make sure former WorldCom CEO Bernie Ebbers could repay $679 million in loans made by Citigroup's former Travelers Insurance unit, loans reportedly secured by WorldCom stock.

In a release late Monday, Citigroup said it hadn't been served with a complaint and denied any impropriety in loans to Ebbers.

Citigroup is also under scrutiny for allegedly doling out shares of hot initial public offerings to various CEOs, including Ebbers, to lure investment banking deals. Last month, New York State Attorney General Eliot Spitzer sued Ebbers and four other telecom executives, alleging they improperly profited from such IPOs -- though Citigroup unit Salomon Smith Barney was not named in the suit.

Salomon was named in a lawsuit filed by former Salomon broker David Chacon, who alleged he was wrongfully terminated by the firm after complaining to management about other brokers giving IPOs to Ebbers and other CEOs.

Spitzer has been in talks with Citigroup about separating its research arm from its investment banking arm, to avoid conflicts of interest. Citigroup has expressed willingness to do this, but only if other banks will follow suit. Citigroup could also end up paying a fine of hundreds of millions of dollars, according to an earlier Journal report.

"Our goal is to not be defensive; our goal is to settle these obligations with regulators and be a leader in moving forward and bringing back confidence in public markets in the United States and around the world," Weill said in the conference call.

Spitzer also reportedly has been talking to former Salomon analyst Jack Grubman, who has become something of a poster boy for research analysts' conflict-of-interest problems.

According to a recent Journal report, Grubman is telling Spitzer that Citigroup pressured him to keep high ratings on WorldCom, AT&T Corp. (T: Research, Estimates) and others to help Citigroup groom clients for its lucrative investment banking business.

In late September, the National Association of Securities Dealers fined Citigroup's Salomon unit $5 million for issuing misleading research reports about Winstar Communications Inc. Salomon admitted that Grubman, who left the firm earlier this year with a $32.2 million settlement package, had no apparent justification for his ratings on Winstar.

At least one issue has been resolved: in September, Citigroup agreed to pay $240 million to settle predatory lending charges in what was then the largest consumer protection settlement in the history of the Federal Trade Commission. The FTC had sued Associates First Capital Corp., which Citigroup acquired for $27 billion in November 2000.

Still unresolved is a Congressional investigation into Citigroup's role in helping bankrupt energy trader Enron Corp. hide debt from investors. In hearings this summer, representatives of the firm denied the bank did anything wrong.