Mega-bank Citigroup Inc (NYSE:C) announced on Tuesday, December 9th that it was planning to take a $3.5bn legal and restructuring charge in the fourth quarter of this year. According to several sources, the too-big-to-fail is preparing to make a final settlement regarding allegations of rate-fixing and money laundering that occurred several years ago.
This charge off by Citigroup Inc (NYSE:C) is just the latest in a string of legals cost incurred by the bank over the last few quarters.
Citigroup had to cut its third quarter earnings by $600 million back in October due to higher legal costs from ongoing regulatory investigations. And in July, Citi agreed to cough up $7 billion to settle a federal probe into its subprime mortgage operations. As a part of the settlement, the megabank acknowledged misrepresenting residential mortgage-backed securities that cratered just a few quarters laters.
Details on Citi’s $3.5 billion 4Q charge
The bank will allocate $2.7 billion of that amount to cover legal costs associated with investigations into currency trading, the manipulation of a key interest rate, as well as anti-money laundering and related probes. The remaining $800 million will be spent reducing the bank’s headcount and cutting its real-estate holdings.
Like other U.S. banks and financial institutions, Citigroup Inc (NYSE:C) is still grappling with the fallout from the financial crisis and the tougher regulatory scrutiny that the industry is facing in the aftermath.
Statement from Citigroup CEO
Citigroup Inc (NYSE:C)’s chief executive officer Michael Corbat said in a statement announcing the charge on Tuesday that the firm’s legal problems are now nearing an end. He also said that, despite the $3.5 billion charge, he still expected the bank to turn a profit in the fourth quarter.
“These legal charges should cover a significant portion of our outstanding legal matters based on current information,” Corbat noted.
Citigroup Inc (NYSE:C) shares are trading down $.52 at $55.85 as of 3:04 PM ET Tuesday.