Citigroup gave its investors a surprise with its 4th quarter results on Tuesday, with an expected US$2.7 billion legal charge associated with multiple investigations.
Citigroup has been discussing for settlement with banking regulators and federal prosecutors over a series of investigations connected to possible manipulation in the lax anti-money-laundering controls and the currency market. The 4th quarter charge also reveals the expected cost of a separate inquiry about the role Citigroup and other large banks played in the alleged manipulation of the benchmark London interbank offered rate, known as Libor.
The charge stated that Citigroup is being closer to settling the inquiries because banks are needed to keep aside the money for legal settlements as soon as they have a sense of the expected penalties.
On Tuesday, December 09, 2014, the chief executive of Citibank, Mr. Michael L. Corbat, declared the charges at a financial market conference. Citigroup shares dropped down almost 1%.
In the statement, Mr. Corbat said that they believe that these legal charges should cover a major portion of the company’s outstanding legal matters on the basis of present information.
This announcement reflects that in the period of strict regulatory inspection of the financial sector, it is very difficult for investors to foresee a bank’s legal expenses. It also represents how Citigroup, like many other big banks, still faces legal problems, even as the fallout from the mortgage crisis of 2008 is coming to a normal term.
In October, 2014, Citigroup stunned its investors when it decreased its reported 3rd quarter income to reflect soaring legal expenses as the bank closed a deal with regulators connected to foreign currency manipulation.