Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Companies / Citigroup sets aside $600 million more to cover legal costs
BackBack

Citigroup sets aside $600 million more to cover legal costs

Citigroup did not say specifically that the additional legal expenses were recognized in anticipation of a settlement of forex probes

Citigroup is one of six major banks that are expected to settle with Britain’s Financial Conduct Authority by mid-November over allegations that the banks manipulated foreign exchange markets. Photo: BloombergPremium
Citigroup is one of six major banks that are expected to settle with Britain’s Financial Conduct Authority by mid-November over allegations that the banks manipulated foreign exchange markets. Photo: Bloomberg

New York/Bangalore: Citigroup Inc. said it was setting aside an extra $600 million to cover legal expenses in the third quarter due to “rapidly evolving regulatory inquiries," while also disclosing that it was subject to foreign exchange market probes.

Citigroup is one of six major banks that are expected to settle with Britain’s Financial Conduct Authority by mid-November over allegations that the banks manipulated foreign exchange markets.

The banks are aiming to settle for a total of around £1.5 billion, or $2.42 billion, sources have told Reuters. Barclays Plc, another of the six banks, said on Thursday it had set aside £500 million for the third quarter to cover potential fines.

Big banks have paid billions of dollars in recent years to settle investigations into their mortgage lending, commodities and interest-rate trading, and a wide range of other activities. Authorities have broadly been trying to hold banks accountable for the excesses that led to the financial crisis.

While the legal costs have hit profits, weighed on share prices, and consumed management time, they have not forced banks to raise money by issuing shares, and are not expected to.

Citigroup, for example, is likely to make nearly $28 billion in pre-tax profits over the next five quarters, way more than enough to cover heightened legal expenses, according to analysts at Bernstein Research.

The bank’s shares fell 2% to $52.05 in extended trading after it revised down its third-quarter net income to $2.84 billion from the $3.44 billion it had posted on 14 October.

On a per-share basis, Citigroup adjusted its profit to 88 cents for the quarter. It had earlier reported a profit of $1.07 per share.

Like most banks, Citigroup does not disclose how much money it has set aside to cover legal costs that it can dip into in the future, known as its “reserves." Bernstein Research analysts estimated before Thursday’s announcement that Citigroup’s remaining reserves were about $2.5 billion at the end of September.

Citigroup did not say specifically that the additional legal expenses were recognized in anticipation of a settlement of the foreign exchange probes.

More possible settlements

After announcing the additional legal expense on Thursday, Citigroup said in a quarterly filing with the Securities and Exchange Commission that its estimate of possible legal costs in excess of its litigation reserves was about $5 billion, the same as it estimated for the end of the previous quarter and for year-end.

Citigroup faces additional possible settlements. Federal authorities are investigating possible money laundering through Citigroup’s Banamex USA unit, for example. The Mexican part of the Banamex business has been beset by multiple problems in the last few years, including fraudulent loans and rogue trading.

Citigroup said in the filing that it was cooperating fully with investigations into its foreign exchange business in Britain, the US, and elsewhere. Reuters

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 31 Oct 2014, 09:07 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App

Chat with MintGenie