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.

Michael Corbat, Chief Executive Officer of Citi, said in a statement, "Our businesses showed resilience in the face of an uneven economic environment. 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. Despite the significant impact of today's settlement on our net income, our capital position strengthened to an estimated Tier 1 Common ratio of 10.6% on a Basel III basis, and our tangible book value increased."

Premarket, stock is trading up 3.62 percent to 48.70 (at time of publishing.)