FORTUNE — Wall Streeters are probably happy to have the second quarter behind them. The question is whether the third will be any better.

More evidence for just how bad the investment banking business is emerged from Citigroup (C). Overall, the bank’s profits, which Citi reported Monday morning, were better than expected. But nearly all of the good news came from the bank’s traditional lending and payment processing businesses. When it came to investment banking, things continued to look bleak.

Both equity and bond trading fell around 40% in the second three months of the year, compared to the first quarter. Underwriting looked better. Fees from bond and stock offerings were only down 1% from the first three months for the year. But that’s mostly because the first quarter was weak as well. Compared to a year ago, Citi’s equity underwriting fees were down 40%. Debt underwriting fell 20%.

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The money Citi made from trading the bank’s own money was up from a year ago. But it’s not clear how much of a positive that is. Most so-called principal transactions are likely to be banned under Dodd-Frank’s Volcker rule, which hasn’t gone into effect yet and is supposed to curtail the banks’ ability to make risky trades. Nonetheless, Citi still generates significant revenue from principal transactions – $3.4 billion in the first half of the year alone, or 20% of its total institutional client business, which includes investment banking, along with some other businesses. How it will replace that revenue when Volcker is fully put into place in early 2014 is unclear.

One bright spot was Citi’s mergers and acquisition advisory business. Revenue in that business nearly doubled in the second quarter from the first three months of the year, and was up slightly from the same period a year ago. But that business, just $200 million in revenue, is tiny relative to the rest of the bank, which generated over $18 billion in sales.

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What’s more, the division has seemed in transition. Earlier this year, Citigroup split the leadership of the unit between Pete Tague and Mark Shafir, who had been lured from the dying Lehman Brothers in 2008 to be Citi’s sole head of M&A. So it’s not clear whether the jump in Citi’s M&A business is the result of the old boss or the new one, or whether it will continue.

On a conference call this morning with investors, Citi’s Chief Financial Officer John Gerspach said layoffs were possible in its investment bank if markets remain choppy. Recruiters, though, say they have heard Citi has already started cutting junior bankers, and that the bank is preparing plans for a larger round of layoffs soon. One search executive said he had heard from a Citi recruit and recent college graduate who was let go one month after relocating to New York City.

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Still, Gerspach downplayed the poor performance of Citi’s investment bank. He said he and other executives at the bank were happy with how the division was doing. The reason, perhaps: while Citi’s I-bank might be sinking, it’s not falling faster than anyone else. In the first half of the year, Citi ranked as the seventh largest investment bank in terms of overall fees – the same place it had a year ago. Meaning investment banking is a Wall Street problem, not just a Citi one.

And while Citi still gets a good portion of its business from investment banking, it can somewhat hide those problems behind its large global banking operations, which do appear to be doing better. That’s a luxury that Goldman Sachs (GS) and Morgan Stanley (MS), both of which report earnings later in the week, don’t have.

UPDATE: Citigroup PR and I finally connected on who runs the bank’s M&A department. I called. They e-mail. There was a mix-up. The division is still run by the team of Pete, not Paul, Tague and Mark Shafir. An earlier version of this story cited a Bloomberg Businessweek story that said the duo had been replaced. That story was incorrect.