Citigroup has agreed to pay US$1.13 billion to settle claims by investors seeking that the lender buy back billions of US dollars in residential mortgage-backed securities.
The New York-based investment bank said on Monday that the pact it reached with 18 institutional investors calls for Citigroup to make a binding offer to the trustees of 68 Citi-sponsored trusts that bundled about US$59.4 billion in home loans into securities from 2005 to 2008.
The settlement offer, which must be approved by the trustees and the court, would release Citi from having to buy back mortgages sold to the trusts.
The lender would remain vulnerable to other types of investor claims, including misrepresentations in the offering documents associated with the securities. It could also face potential actions by regulators.
The agreement also does not cover home loans sold through private-label securitization trusts via Citigroup’s consumer mortgage business.
As part of the settlement, Citigroup said it has taken a charge of about US$100 million for the first quarter.
Shares of Citigroup ended regular trading on Monday down US$0.56, or 1.2 percent, at $46.55. The stock regained US$0.5 in extended trading.
A number of big banks, including Citigroup, JPMorgan and Goldman Sachs have been accused of abuses in sales of securities linked to mortgages in the years leading up to the 2008 financial crisis.
Together, they have paid hundreds of millions of US dollars in penalties to settle civil charges brought by the Securities and Exchange Commission, which accused them of deceiving investors about the quality of the bonds they sold.
Separately, Citigroup’s South Korean lending unit plans to close 29 percent of its branches as the lender faces deteriorating profit in the country.
Citibank Korea Inc will shut 56 of its 190 branches and concentrate on six major cities, including Seoul, to focus on “high-quality” clients and digital banking, the bank said in an e-mailed statement today. The company did not say when the closures will be completed.
Citigroup’s chief executive officer Michael Corbat has scaled back consumer operations in some nations and targeted wealthier clients in the largest global cities to improve returns. In South Korea, shrinking lending margins and record household debt have crimped earnings at banks including Citibank Korea and the local unit of Standard Chartered PLC.
The closures reflect changing consumer needs in a country where nine out of every 10 banking transactions take place outside a branch, Citibank Korea said in the statement. South Korea’s banking industry faces a trend of lower profitability over the long term, it said.
The bank has not decided on how to address a possible workforce reduction, Oh Young-ran, a spokeswoman for Citibank Korea in Seoul, said by telephone yesterday.