NEW YORK -- Citigroup said Tuesday that it will incur charges of $3.5 billion in the fourth quarter to cover legal and restructuring costs.
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 and money laundering. The remaining $800 million will be spent reducing the bank's payroll by eliminating positions and cutting its real-estate holdings.
Like other U.S. banks and financial institutions, Citi is still grappling with the fallout from the financial crisis and the tougher regulatory scrutiny that the industry is facing in the aftermath.
Citi's Chief Executive Officer Michael Corbat said in a statement announcing the charge that the bank's legal woes may now be nearing an end. He also said that despite the charge, he still expected the bank to turn a profit in the quarter.
"These legal charges should cover a significant portion of our outstanding legal matters based on current information," Corbat said.
The bank's fourth-quarter legal expenses and costs for shrinking the business will bring the total for those items under Corbat's watch to $13.3 billion, more than half of the bank's earnings in his 26-month tenure. The $800 million in costs to dismiss workers and close branches and offices will be the most since the quarter when Corbat succeeded Vikram Pandit as CEO.
Corbat is seeking to trim expenses after years of acquisitions and mismanagement created a bloated infrastructure and inflated staff levels. The company's restructuring expenses have totaled $3.4 billion since he became CEO, including costs linked to a portfolio of assets the bank has tagged for sale. Corbat said Tuesday that the effort will lead to $3.4 billion in savings.
The bank has earned $21.8 billion in the eight quarters since Corbat became CEO, according to company reports.
The bank's stock slumped on Tuesday's news, falling 52 cents, or almost 1 percent, to close at $55.85 after falling as low as $54.69 during the day.
The charge is the latest in a long list of legal costs incurred by the bank.
In October, Citigroup was forced to cut its third-quarter earnings by $600 million because of higher legal costs associated with regulatory investigations. And in July, Citi agreed to pay $7 billion to settle a federal investigation into its handling of risky subprime mortgages. The bank acknowledged misrepresenting residential mortgage-backed securities that later plunged in value.
The bank will report its fourth-quarter earnings Jan. 15.
Information for this article was contributed by Steve Rothwell of The Associated Press and Dakin Campbell of Bloomberg News.
Business on 12/10/2014