In spite of some spectacular individual company declines, third quarter profits were up by an overall 12 per cent from a year ago. Citibank reported today.

The Citibank survey was based on a sample of 1,638 corporations, around four times as many as an eariler Wall Street Journal survey of third quarter profits, which showed a much smaller gain.

The Commerce Department's survey of all profits for the quarter still is awaited.

Citibank said 75 per cent of the firms in its sample had gains. It said the earlier gloomy colors in the profit picture were caused by the large decline in steel profits and Bethlehem's $894 million pretax loss.

The 12 per cent overall increase compared with 11 per cent in the first half. The biggest gains were reported by 607 non-manufacturing firms that had average increases of around 17 per cent.

The survey said the exceptions to the trend "are grabbing the headlines and could deepen the gloom in the investment community."

It charged that "unsophisticated use of raw data" for the latest quarter "has led to newspaper reports and forecasts of an unrealistically low level of aggregate earnings . . ."

The bank said "such distortions can have an unfortunate impact on investment decisions and markets," since profits are widely used as a barometer of business health.