The charge pushed down the financial giant's second-quarter net income to $181 million from $4.18 billion a year earlier. On a per-share basis, net income was 3 cents, compared with $1.34 in the second-quarter a year earlier.
Excluding the charges and an accounting gain, the bank's profit for the the period rose 1 percent to $3.93 billion, or $1.24 a share.
A year earlier, the bank earned $3.89 billion, or $1.25 per share. Revenue was $19.4 billion, excluding the accounting gain, compared with $20 billion a year earlier. In early trading, Citi's stock rose $1.56, or 3.3 percent, to $48.56.
"Our businesses showed resilience in the face of an uneven economic environment," Citi CEO Michael Corbat said in a statement. "During the quarter, we continued to grow loans in our core businesses, reduce operating expenses by simplifying our products and processes and utilize our deferred tax assets."
Citi on Monday said it will pay $7 billion to settle an investigation into shoddy mortgage-backed securities the bank sold in the run-up to the 2008 financial crisis. Attorney General Eric Holder is expected to hold a new conference Monday to announce terms of the settlement.
Citigroup becomes the second big Wall Street bank to settle a federal probe into its mortgage practices in the years leading up to the housing crash. In November, JPMorgan Chase (JPM) agreed to a $13 billion settlement, the largest ever reached between the government and a U.S. corporation.
Ken Usdin, an analyst with Jefferies, said Citi's $1.24 earnings per share in the quarter was higher than expected, noting that Citi's trading results were stronger than forecast while provision expenses were lower. "Overall, the 2Q print looks pretty solid, and finality of the [Justice Department] settlement is also a positive," he said in a research note.