Citi’s $730-million settlement unlikely to be last big legal bill
NEW YORK -- Citigroup’s $730-million legal settlement likely won’t be the bank’s last whopping payout as private and government attorneys force Wall Street to do penance for the financial crisis.
At the end of 2012, Citi estimated it could face approximately $5 billion in future legal expenses, up from about $4 billion a year ago.
The massive settlement, which a federal judge in Manhattan must still approve, likely won’t be the last huge sum Citi shells out, but much of the worst may be behind the New York-based bank, according to Erik Oja, a banking analyst at S&P; Capital IQ.
“These things will continue for a while, but we’re much more than halfway through,” Oja said. The bank has the resources and time to settle and litigate as needed, he added.
The $730-million settlement, which surfaced in documents filed in federal court Monday, stems from a class-action suit filed by investors who bought Citi’s bonds and preferred stock before the financial crisis of 2008-2009.
Citi said the settlement marked another “significant step” to resolving claims arising from the crisis.
“Citi is a fundamentally different company today than at the beginning of the financial crisis,” the bank said in a statement. “We have overhauled risk management and reduced risk exposures, while shedding assets and businesses that are not core to our strategy.”
As legal expenses weigh on the bank, Citi has embarked on a turnaround under Michael Corbat, its new chief executive, who took over after Vikram Pandit left in a shake-up last year.
Citi shares were down 47 cents, or 1%, to $45.77 midway through trading Tuesday.
[For the Record, 11:14 a.m. PDT: An earlier version of this online post said Citi had set aside $5 billion for legal expenses. That figure billion was an estimate of what Citi had anticipated it could face in future legal costs.]
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