Late last week, speculation arose about Citibank's settlement with the U.S. Department of Justice. While negotiations were in danger of breaking down, they were able to settle on a $7 billion fine the result of an investigation into Citi's defrauding of investors with mortgage securities leading up to the financial crisis.
In a press release, Citigroup confirmed they will pay $4.5 billion in cash and $2.5 billion in consumer relief. The consumer relief will come as financing for construction, preservation of affordable rental housing, principal reduction and forbearance of residential loans, as well as other relief programs for borrowers. Citi must provide this relief by the end of 2018.
Additionally, as part of the settlement, Citigroup " will take a charge of approximately $3.8 billion pre-tax in the second quarter of 2014." Second-quarter earnings results were also posted this morning, and while the fine may be a brutal hit over time, Citi beat expected earnings.
While predictions hovered around the $18.8 billion mark for revenue, Citigroup brought in $19.3 billion, for a net income of $181 million, or $0.03 per diluted share. In for the second quarter of 2013, net income was $4.2 billion, or $1.34 per diluted share, on revenues of $20.5 billion. These results include a $3.9 billion charge in relation to the settlement, including $3.7 billion in legal expenses. Last quarter, other banks also posted booming legal fees.