Shares in U.S. bank Citigroup Inc (NYSE:C) rallied more than 3% in premarket trade on Monday after its latest earnings report showed that the bank achieved larger than expected earnings in the second quarter.

Citigroup reported earnings of $1.24 per share in the last quarter, ahead of forecasts of $1.05 per share.

The bank said total revenues declined to $19.34 billion in the quarter, down from $20.49 billion a year ago.

The lender said earnings fell to just $0.03 per share once the cost of settling its mortgage-backed securities probe was included.

The bank agreed Monday to a $7 billion settlement to resolve a probe into allegations that it misled investors by selling securities linked to toxic loans in the lead up to the 2008 financial crisis.

The bank said it would pay $4.5 billion in fines and provide $2.5 billion in compensation to consumers. Citigroup said it will take a $3.8 billion pre-tax charge to help cover the penalty.

Citigroup's shares were up 3.79% at $48.78 before the bell.

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