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Citigroup reported a profit increase that was less than analysts estimated as litigation costs rose and benefits from releasing loan-loss reserves declined.
January 17 -
Although American Express received lighter fines than the two previous credit card players targeted by the Consumer Financial Protection Bureau, many believe the CFPB's third enforcement action is its biggest statement yet.
October 1 -
The Consumer Financial Protection Bureau issued its second enforcement action on Monday, hitting Discover with a $200 million fine. Observers said it was clear violations will carry a steep price tag.
September 24
Citigroup's (NYSE:C) consumer banking business is getting it into trouble again — and this time the problem isn't mortgages.
The third-largest bank's
"I don't think it's any secret that the CFPB has been reviewing various consumer products, and in fact, they are currently reviewing us. But, you know, I'm not going to say anything more about individual regulator discussions," Gerspach told analysts during a Thursday conference call.
A source familiar with the review said it includes credit card add-on products.
Gerspach also said that the $500 million reserve was not tied to the wide-ranging mortgage problems that Citigroup and other large banks have spent years trying to settle, but he would not be much more specific.
"It's tied to the U.S. consumer business," he told reporters, before declining to comment "on reserving actions unless it's related to a specific settlement."
Such a settlement might not be official yet, but one of the likeliest targets appears to be the insurance-like payment protection plans that Citigroup and other banks sell to credit card customers.
"We continue to expect that more such actions will follow," CFPB Director Richard Cordray said
A CFPB spokeswoman declined to comment on Thursday.
Banks have scrambled to review their payment protection plans, identity-theft protection and other add-on products since the summer, when the CFPB announced its first action against Capital One. Bank of America (BAC)
"Like the rest of the industry, a lot of those products have been re-reviewed and rethought," he told reporters. "We've rethought our offerings. There are still add-on products that are being sold, and there are some that we've altered."
Citigroup could also be facing a regulatory action similar to the multi-agency
And any settlement may not be imminent; last year, Discover
Citigroup is facing other problems in its credit cards businesses, where both loan balances and revenues fell. Gerspach blamed industrywide problems, including consumers who are reluctant to take on new debt and banks that are reluctant to lend to less creditworthy customers, but he also said that Citigroup is only about halfway through its efforts to revamp its credit cards business. It hired cards chief
The mysterious reserve was only one of several legal expenses weighing down Citigroup, which took overall charges of almost $1.3 billion for legal and related costs. That included a previously announced $305 million charge for a foreclosure-related settlement with regulators. The bank also recorded almost $1 billion in previously announced costs, tied to the bank's efforts to slim down its operations and lay off 11,000 people.
Overall profit and revenue missed analysts' estimates, even accounting for a slew of one-time items including the legal costs. Net income
It was a "disappointing" first report under new Chief Executive Michael Corbat, he acknowledged during the analyst call Thursday. The bank's board abruptly
Investors agreed with Corbat's review of the earnings, sending Citigroup shares down almost 3.3% by midafternoon to $41.08.
"To be clear, we're not satisfied with these bottom-line earnings," Corbat told analysts. "Our focus is not only on putting the drag of legacy issues behind us, but also in optimizing the efficiency and returns of our business as a whole."