Citigroup Inc., the biggest American bank, said second-quarter profit gained 4% as rising costs from new branches, recruiting and acquisitions countered higher trading and investment-banking revenue. The company’s shares had their steepest one-day drop since February.

Net income increased to $5.27 billion,or $1.05 a share,from $5.07 billion, or 91 cents, a year earlier, the New York-based company said today in a statement.The results missed analysts’ estimates, the fourth time in the past five quarters that CEO Charles Prince disappointed investors. Revenue from continuing operations was $22.2 billion, matching the company record.

“He’s managing for the long term, but if you don’t generate meaningful short-term results, the stock price will come under pressure,” said Bill Fitzpatrick, an analyst at Racine, Wisconsin-based Johnson Asset Management, which oversees $1.4 billion and owns Citigroup shares.

Trading revenue rose 45%, though it fell short of some forecasts after stock and commodity prices declined from quarterly highs.The Smith Barney brokerage dragged on earnings as costs rose, gains from private-equity investments fell and Citigroup reported a loss in hedge funds.

“It was a difficult environment for the capital markets and trading revenues,” said Peter Kovalski, who helps oversee $3 billion at Alpine Funds, which owns Citigroup shares. “Another area that came in a little weaker than expected was private-equity investments.”

Shares of Citigroup fell $1.18, or 2.5%, to $46.40 in composite trading on the New York Stock Exchange.

Revenue from continuing operations, which excludes year-earlier results from the life-insurance and asset-management units that Citigroup has sold, rose 10% and profit on that basis increased 11%. Return on common equity was 18.6%, down from 20.3% in the first quarter.

Citigroup said operating expenses rose 16%, partly because of spending on investments, acquisitions and an accounting change. Prudential Equity Group analyst Michael Mayo downgraded Citigroup shares to “neutral weight” from “overweight” because expenses rose faster than revenue.

“This makes us ask whether there is strong enough oversight to ensure that proper assumptions are used to ensure that the spending is appropriate in the current environment and for more conservative scenarios,” Mr. Mayo wrote in a note to clients.

Mr. Prince, who is emphasizing socalled organic growth over the large acquisitions that once defined Citigroup, opened a record 270 branches during the quarter, including 196 overseas. Citigroup has been adding traders and investment bankers and spending more to market its products worldwide.