Citigroup (NYSE:C) reported fourth-quarter profit that missed Wall Street estimates as bond trading slumped. The stock fell more than 2.5% in early New York trading.

Net income more than doubled to $2.69 billion from $1.2 billion a year earlier, when Citigroup reported a $653 million charge, and earnings per share rose to 85 cents from 38 cents, the New York bank said Thursday. Excluding accounting charges and special items, adjusted profit was 82 cents a share, according to Citigroup. The average estimate of 26 analysts surveyed by Bloomberg was 95 cents.

Chief Executive Officer Michael Corbat, 53, sought to cut costs and boost revenue even as trading from bond and foreign-exchange markets came under pressure. The effort was marred by a 15% drop in fixed-income revenue excluding accounting charges. Adjusted profit decreased 8 % at the securities and banking unit and 16% for global consumer banking, according to the firm.

"We haven't seen any rebound in fixed income," Marty Mosby, a bank analyst with Guggenheim Securities LLC, said in an interview before the results were announced. That's what the bank "really needs because they are more heavily dependent on that than the other money-center banks," he said. Mosby has a buy rating on the stock with a $68 price target.

The results were close to the most pessimistic Wall Street estimates, and Citigroup fell $1.46 to $53.53 at 8:57 a.m. in New York. The stock gained 32 % last year, trailing the 35% return for the 24-company KBW Bank Index. (BKX)

Quarterly revenue excluding an accounting charge tied to the value of the firm's own debt and other items declined 2% to $17.9 billion. For the full year, net income rose 84% to $13.9 billion on a 10 % increase in revenue to $76.4 billion.

Adjusted quarterly profit was $1.06 billion at the securities and banking unit and $778 million at the transaction services segment. Both businesses are overseen by co-President James "Jamie" Forese.

Within securities and banking, fixed-income revenue excluding an accounting adjustment shrank 15% to $2.33 billion from a year earlier. That compares with the $2.5 billion estimate of Sanford C. Bernstein & Co.'s John McDonald. The bank generated $13.1 billion from fixed-income markets for the year, a 7% decline from 2012. Francisco "Paco" Ybarra oversees the bank's global markets operations.

Adjusted revenue from investment banking, which includes managing bond and share sales for clients and providing advice on mergers and acquisitions, rose 3% to $1.04 billion. Equity markets revenue climbed 16 % to $539 million from a year earlier while falling 24% from the third quarter, the company said.

Adjusted profit from consumer banking, run by co-President Manuel Medina-Mora with about 4,000 branches across almost 40 countries, dropped to $1.63 billion from $1.95 billion in the year-earlier quarter.

Return on equity for the quarter was 5.3 %. By contrast, Wells Fargo & Co. (WFC) reported a 13.8% ROE, JPMorgan Chase & Co.'s was 10% and Bank of America Corp. posted 5.7%. New York-based JPMorgan is the biggest U.S. bank by assets and Bank of America, based in Charlotte, North Carolina, is second. San Francisco-based Wells Fargo has the highest market value.

Wall Street banks are grappling with a slump in bond trading amid new regulations and a changing landscape. Uncertainty around the Federal Reserve's decision to taper its monthly bond purchases, and a U.S. government shutdown kept bond investors sidelined during the fourth quarter, according to Todd Hagerman, a Sterne Agee & Leach Inc. analyst and former Fed bank examiner.

That left Citigroup more vulnerable than many of its competitors "given their outsized rates and currencies business," Hagerman said before the results were announced. "It will raise the question: are they going to be in a position to generate positive operating leverage in 2014 when they continue to face these headwinds in the top line?"

Revenue from fixed-income, currencies and commodities trading, or FICC, probably fell to $73 billion at the 10 largest global investment banks in 2013, about half the level of 2009, according to industry analytics firm Coalition Ltd.

As the year came to a close, Corbat sought to keep a lid on pay. Investment bankers could receive payouts that are little changed compared with 2012, while traders and salespeople could get cuts of 2 %, a person familiar with the matter said in December.

The lender is also facing regulatory investigations and legal challenges. It's cooperating with government agencies in the U.S. and elsewhere over probes in the foreign-exchange market, and facing inquiries related to its sales of mortgage-backed securities.

Citigroup set aside $1.4 billion for litigation and legal costs during the first nine months of 2013, according to regulatory filings. That compared with $11.1 billion at JPMorgan and $4.8 billion at Bank of America. Figures for the final quarter haven't been released.

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