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Citigroup Inc (NYSE:C) To Pay $7 Billion In Mortgage settlement

Boston, MA 07/09/2014 (wallstreetpr) – Citigroup Inc (NYSE:C), one of the largest banks in the U.S. with more than $144 billion market cap, will likely pay more than was expected to settle a probe into the company’s mortgage deals in the run-up to the 2008 and 2009 financial crises.

Several Wall Street banks have already had their fair share of the mortgage problems of which they have lost billions of dollars in legal settlements. The banks that have suffered high costs in the settlements include Bank of America Corp. (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM).

JPMorgan paid $13 billion in November over the same mortgage probe. The U.S. authorities have increased scrutiny of the financial system in efforts to forestall a reoccurrence of the financial downturn as witnessed five years ago.

Hefty settlement

Sources say Citigroup Inc (NYSE:C) may end up paying $7 billion to resolve a probe into the claims that the bank defrauded investors in mortgage-backed securities.  If the source is correct, the settlement will be significantly higher than $3 billion that most analysts on Wall Street estimated.

However, the settlement would be less than $10 billion or more that the U.S. Department of Justice sought last month, according to media sources.

The talks between the company and the U.S. authorities almost stalled last month when the two sides disagreed on a settlement figure. In fact, they stood far apart on the settlement issue.

Most of the settlement is expected to be made in cash. However, a significant figure will go into helping the struggling borrowers, according to the source.

With official public announcement of the deal between Citigroup Inc (NYSE:C) and the U.S. agency expected early next week, the two declined to comment on the matter ahead of the announcement.

Earnings report

Citigroup Inc (NYSE:C) is expected to report its 2Q2014 financial results next week. On the average, Wall Street estimates that the bank will earn $3.4 billion for the quarter.

Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

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