By Tanya Agrawal and David Henry
(Reuters) - Citigroup Inc, in the midst of a pullback from consumer banking in a number of international markets, eked out a slim fourth-quarter profit after taking charges of $3.5 billion to settle legal claims and overhaul operations.
The total charges matched the figure foreshadowed by Chief Executive Mike Corbat in December, but the earnings fell short of market expectations and the bank's shares fell 3 percent.
Adjusted net income fell to $346 million, or 6 cents per share, from $2.60 billion, or 82 cents per share, a year earlier, the No. 3 U.S. bank by assets said.
Analysts on average had expected earnings of 9 cents per share, including charges, according to Thomson Reuters I/B/E/S.
Adjusted revenue fell 0.8 percent, largely due to the strong U.S. dollar and weaker results from fixed-income trading.
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Citi is the most international of the big U.S. banks, with about half of its business coming from abroad.
"Although we made some difficult decisions ... I believe they allowed us to put our franchise in a position to have a successful 2015," Corbat said in a statement.
With fixed-income markets remaining tough, Citi's forecast of a 5 percent decline in markets revenue in the quarter turned into a 16 percent drop. JPMorgan Chase & Co and Bank of America Corp have also reported declines in fixed-income revenue.
Consumer banking revenue rose 3 percent on a constant-dollar basis, reflecting strength in Citi's North American business as well as one-time gains from the sale mortgage loans.
Citi has taken nearly $3.4 billion in repositioning charges since Corbat became CEO in October 2012, including costs for shutting down or selling retail businesses in 16 countries.
Adjusted operating expenses increased 21 percent.
The bank's most recent legal woes stem from government probes into alleged manipulation of currency markets and Libor interest rates as well as lax compliance with money laundering rules. The company still faces other possible actions by the U.S. Department of Justice and Federal Reserve.
Citigroup made further progress with what is left from the financial crisis of its portfolio of troubled assets. The portfolio, known as Citi Holdings, generated revenue of $1.31 billion in the quarter, compared with $1.59 billion in the previous quarter, because of smaller gains from asset sales.
Chief Financial Officer John Gerspach said getting approval from the Federal Reserve to distribute more capital to shareholders remains a major priority.
The bank added about $180 million of costs in 2014 to improve its capital planning processes to boost its case with the Fed, he said, adding that a decision was expected in March. The Fed rejected Citi's previous request over capital issues.
The bank also said it was exiting some non-core businesses in its institutional clients group division, including prepaid cards and hedge fund administration.
These operations will be reported as part of Citi Holdings from 2015. The businesses Citi is ditching lost $82 million last year, due in part to exit costs.
(Reporting by Tanya Agrawal and David Henry; Editing by Ted Kerr)