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Citigroup set to attract legal scrutiny: Portales

REGULATORY TARGET:An analyst said the bank is ‘next in the firing line’ after JPMorgan Chase. Its legal costs climbed to US$1.44bn in the first half of the year

Bloomberg

Citigroup Inc is poised to be the next US bank to attract legal and regulatory scrutiny as JPMorgan Chase & Co looks to settle a host of probes, a Portales Partners LLC analyst said on Friday.

Citigroup’s US$5 billion estimate of potential legal costs that were not covered by reserves at midyear is second only to JPMorgan, Portales analyst Charles Peabody said in a Bloomberg Radio interview.

That shows Citigroup may be bracing for more legal challenges, Peabody said.

“It’s very conceivable that Citigroup will be next in the firing line,” Peabody said. “Their litigation costs have been accelerating faster than anyone else’s.”

Citigroup is the third-largest US bank by assets and JPMorgan is ranked first. Both are based in New York.

US Attorney General Eric Holder said earlier this month that announcements about banks other than JPMorgan would be made in the coming weeks and months. Citigroup CEO Michael Corbat has seen litigation costs climb to US$1.44 billion in the first half of the year, putting this year on track to be the most expensive for such costs since the financial crisis, according to data compiled by Bloomberg.

Citigroup’s estimate for potential legal costs rose from US$4 billion a year earlier. JPMorgan raised the upper end of its estimate to US$6.8 billion from US$5.3 billion. Bank of America Corp reduced its figure to US$2.8 billion from US$4.1 billion after settling some of its biggest pending cases.

Citigroup’s litigation costs totaled US$8.1 billion from 2008 through the end of June, according to data compiled by Bloomberg. That compares with US$21.3 billion at JPMorgan and US$19.1 billion at Bank of America Merrill Lynch. Wells Fargo & Co’s totaled US$2.7 billion.

“You’re going to see a continuation of headlines dealing with litigation,” Peabody said.

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