Lower U.S. mortgage refinancing activity caused third-quarter revenue within Citi’s (C) Global Consumer Banking unit to decline 7% to $9.2 billion for the third-quarter.

In North America, total consumer banking revenue at Citi fell 12% to $4.7 billion in 3Q2012, while international revenue for the unit declined only 1% to $4.5 billion.

Citi, like JPMorgan (JPM) and Wells Fargo (WFC), is feeling the pinch of slowing refi activity as interest rates edge up, refi burnout hits and market uncertainty creates drag on the mortgage side of the house.

Overall, Citi reported net income of $3.2 billion, or $1 per diluted share for the quarter, on revenue of $17.9 billion. The company’s revenue was impacted by a loss stemming from tightening credit spreads and a pre-tax loss of $4.7 billion tied to its Morgan Stanley Smith Barney joint venture. The bank fell short of analyst estimates of 3Q EPS of $1.04 per share.

This compares to net income of $468 million, or 15 cents a share, on revenue of $13.7 billion a year earlier.

A unit-by-unit breakdown shows Citi's global consumer banking unit recording a retail banking revenue drop of 35% from year ago levels — with only $1.1 billion in 3Q revenue recorded. This drop is attributed to the impact of spread compression, a factor somewhat offset by deposit and commercial loan growth.

The company notes that retail banking revenue is expected to continue feeling the negative impact of lower mortgage origination revenue and spread compression.

The company’s net credit losses – or potential losses from credit risks – include $635 million in mortgage charge-offs required by the Office of the Comptroller of Currency. These credit losses were calculated in response to the OCC's guidelines for handling mortgage loans when a borrower goes through the Chapter 7 bankruptcy process.

However, the same charge-offs were greatly offset by a reserve release of $600 million, Citi noted.