This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Citi Raises Legal Loss Estimate to $5 billion

NEW YORK ( TheStreet) -- Citigroup (C - Get Report) on Friday raised its estimate of possible legal losses to $5 billion from its previous estimate of $4 billion.

The bank also highlighted new legal risks in its consumer business, in its annual 10-K filing with the Securities and Exchange Commission.

Citigroup like other big banks continues to deal with legal liabilities arising out of its conduct heading into the mortgage crisis.

In the fourth quarter, the company incurred higher-than-expected legal expenses to the tune of $1.3 billion. The management said the bank had reserved for possible legal losses related to its U.S. consumer business but did not provide further details.

In the 10-K filing, the bank noted that certain of its consumer businesses including Citi branded and retail card business were marketing "add-on" services, including payment protection and identity monitoring. "These add-on products have been the subject of enforcement actions against other institutions by regulators, including the Consumer Financial Protection Bureau (CFPB), the OCC, and the FDIC, that have resulted in orders to pay restitution to customers and penalties in substantial amounts."

Some state attorneys general have also been going after credit card lenders alleging improper marketing of credit protection services. Citi went on to say that "in light of the current regulatory focus on add-on products and the actions regulators have taken in relation to other credit card issuers, one or more regulators may order that Citi pay restitution to customers and/or impose penalties or other relief arising from Citi's marketing, distribution, or servicing of add-on products."

Banks are required to estimate "reasonably possible" legal losses, meaning the chance of the future event or events occurring is more than remote but less than likely. These are expenses that the bank has not already reserved for and could potentially hurt earnings.

Citigroup is in the midst of restructuring its businesses under new CEO Michael Corbat and recently announced that it will shed 11,000 jobs, shut branches and exit unprofitable markets.

Shares of the bank were lower by 1% in premarket trading.

-- Written by Shanthi Bharatwaj in New York.

>To contact the writer of this article, click here: Shanthi Bharatwaj.

>To follow the writer on Twitter, go to http://twitter.com/shavenk.

>To submit a news tip, send an email to: tips@thestreet.com.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
C $58.54 0.14%
TSLA $264.18 -0.74%
YHOO $36.82 0.41%
AAPL $121.03 -0.22%
FB $94.67 0.70%

Markets

Chart of I:DJI
DOW 17,631.53 -58.33 -0.33%
S&P 500 2,102.24 -1.60 -0.08%
NASDAQ 5,131.4420 +3.1610 0.06%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs