Citigroup sets aside $600 million more to cover legal costs
By David Henry and Ankur Banerjee
(Reuters) - Citigroup Inc (C.N: Quote) 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 pounds sterling, or $2.42 billion, sources have told Reuters. Barclays Plc, another of the six banks, said earlier on Thursday that it had set aside 500 million pounds 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 dragged down profits, weighed on share prices, and consumed managements' time at the banks, 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 percent 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 Oct. 14.
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. Continued...