Citigroup (C) Downwardly Adjusts Third Quarter Earnings

Shares of Citigroup Inc. (C) were trading down -0.75 or -1.41 percent to $52.40 per share in pre-market trading on Friday, after the company announced it was downwardly adjusting its third quarter earnings due to increased legal costs. Citigroup stock closed at $53.15 per share, up +0.51 or +0.97 percent in Thursday's regular trading session.

New York, New York based Citigroup Inc. is the third largest bank holding company in the United States and a major multinational financial services corporation.
The company was formed after the 1998 merger between Citicorp and Travelers Group. Citigroup is the third largest bank holding company by assets and the company's financial network - the world's largest - spans 140 countries with 16,000 offices and over 260,000 employees worldwide.

Citigroup announced it was cutting its third quarter profit by $600 million due to an increase in "legal accruals . The company released earnings of $1.07 per share on October 14th, which were revised down to $0.88 after yesterday's adjustment.

In the company's press release, Citigroup stated that, "The increase resulted from rapidly-evolving regulatory inquiries and investigations, including very recent communications with certain regulatory agencies related to previously-disclosed matters. The financial impact lowers Citis' third quarter 2014 net income from $3.4 billion to $2.8 billion.

Citigroup is among a number of banks and financial institutions currently being investigated for their dealings in the foreign exchange market. The worldwide probe into foreign exchange market manipulation is being conducted by the U.K.'s Financial Conduct Authority, the U.S. Justice Department, the CFTC and the Swiss Competition Commission.

Citigroup said it was cooperating with the investigation, which has been ongoing for months now, and had already put aside a substantial amount to settle outstanding lawsuits. According to some sources, UK and U.S. regulators were fast tracking the settlement talks but did not expect any significant progress before the end of the year.

Earlier this year, Citigroup cut its fourth quarter earnings for 2013 in half, in the wake of a scandal at its Mexican subsidiary Banamex. Banamex had extended $585 million of credit to a Mexican oil services company known as OSA. The financing was for accounts receivable from the national oil company Pemex, which later informed Citigroup that the valid receivables were significantly lower than OSA's figures leading Citigroup to take a $400 million charge to its Transaction Services business in 4Q of 2013.

In a regulatory filing made yesterday, Citigroup said that the Mexican National Banking and Securities Commission had completed its review of the fraud and imposed a "corrective action that the bank must implement in addition to a $2.2 million fine.

Citigroup is among six other large banks that are hoping to come to an agreement with British regulators over their foreign exchange dealings. According to sources close to the matter, the banks are hoping to come to reach a deal with British regulators by the end of November.

Citigroup stock is trading at the higher end of its yearly range, having traded as high as $55.28 in early January. The stock appears to be range bound between $46 and $55. This morning's premarket reaction to the earnings cut has not significantly impacted the stock's price and will probably not affect the stock going forward. Nevertheless, a large penalty for the company's foreign exchange dealings may negatively impact next quarter's earnings,

Other News About Citigroup
Citi names agencies investigating FX business
Video report on the agencies currently investigating Citigroup.
Citigroup Said to Seek Offers for OneMain by Nov. 20
Citigroup has asked potential buyers to submit bids for the personal lender by November 20th.

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Published on Oct 31, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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