Citi profit helped by better-than-expected fixed income trading

The settlement figure, announced early on Monday, was more than twice what many analysts had expected earlier this year but less than the $12 billion sought by the government in negotiations with the bank.

Including a charge of $3.8 billion related to the settlement, the bank's second-quarter earnings fell 96 percent to $181 million.

But adjusted net income, which excludes the settlement charge and some changes to the value of the bank's debt, was $3.93 billion, or $1.24 per share, compared with $3.89 billion, or $1.25 per share a year earlier.

Analysts on average had expected earnings of $1.05 per share.

Citigroup's stock was up 3.9 percent at $48.82 in premarket trading on Monday, only slightly above where they were at the end of the second quarter of 2013.

The KBW bank stock index has risen about 15 percent in the past 12 months.

Adjusted revenue from fixed income markets fell 12 percent to $2.9 billion - a much better outcome than the drop of 20-25 percent that Chief Financial Officer John Gerspach had braced the market for in May.

Citigroup's fixed-income results are first to be reported by a major U.S. investment bank this quarter and are a pointer to how the others may have fared in that business.

Fixed income trading has slumped amid uncertainty about the global economy, low volatility as interest rates stay low, and new rules imposed by regulators to protect the financial system.

Total profit in Citi's investment banking, capital markets and treasury services businesses fell 16 percent to $4.08 billion.

Adjusted revenue at Citicorp, which houses the bank's main continuing businesses, fell 5 percent to $17.9 billion.

Overall adjusted revenue fell 3 percent to $19.38 billion.

Citigroup has been trying to reduce expenses at the same time that it has had to spend more to satisfy regulators by upgrading its risk controls and safeguards against money laundering through its accounts.

But overall adjusted expenses fell just 3 percent in the quarter.

(Reporting by Tanya Agrawal and David Henry; Editing by Ted Kerr)