Financial Results
Citigroup Logs Rise In Private Banking Revenue; Settles Mortgage Probe With US Government

Private banking revenues rose in the second quarter at Citigroup, while the US banking group, as expected, reached a $7 billion settlement to resolve a US probe over sales of mortgage-backed securities.
US-listed Citigroup
saw private bank revenues increase 2 per cent for the second
quarter to $656 million from the previous year as growth in
client volumes was partially offset by the impact of spread
compression, the bank said. The bank has also paid $7 billion to
resolve a US government probe over mortgage-backed
securities.
The bank gave few other details about the performance of its
private banking arm in yesterday's results.
Citi reported net income for the second quarter 2014 of $181
million compared to $4.2 billion for the second quarter 2013,
while revenues of $19.3 billion declined 6 per cent from the
prior-year period.
Excluding CVA/DVA, Citigroup said that revenues fell 3 per cent
to $19.4 million from the prior-year period.
The bank said that this decrease was driven by a 5 per cent
decline in Citicorp revenues, primarily due to a decline in fixed
income markets revenues in institutional clients group and lower
US mortgage refinancing activity in North America global consumer
banking, partially offset by higher Citi holdings revenues.
"Our businesses showed resilience in the face of an uneven
economic environment. During the quarter, we continued to grow
loans in our core businesses, reduce operating expenses by
simplifying our products and processes and utilize our deferred
tax assets,” said chief executive of Citi Michael Corbat.
“Despite the significant impact of today's settlement on our net
income, our capital position strengthened to an estimated Tier 1
Common ratio of 10.6 per cent on a Basel III basis, and our
tangible book value increased,” he added.
Settlement
As widely trailed in the media Citigroup has paid $7 billion to
US authorities to settle claims that it mislead investors about
securities containing toxic mortgages in the run up to the
financial crisis.
Under the terms of the settlement Citigroup will pay a total of
$4.5 billion in cash and provide $2.5 billion in consumer
relief.
Consumer relief includes financing provided for the construction
and preservation of affordable housing and mortgage relief.
"This historic penalty is appropriate given the strength of the
evidence of the wrongdoing committed by Citi,” said Attorney
General Eric Holder in a statement.
“The bank's activities contributed mightily to the financial
crisis that devastated our economy in 2008. Taken together, we
believe the size and scope of this resolution goes beyond what
could be considered the mere cost of doing business. Citi
is not the first financial institution to be held accountable by
this Justice Department, and it will certainly not be the last,”
Holder added.
The bank has been accused of misrepresenting the quality of
mortgage-backed paper sold to investors as house prices
plummeted. The aftermath of the 2008 financial crash continues to
see considerable litigation as disgruntled investors seek to
recover something from the financial rubble.
“The comprehensive settlement announced today with the US
Department of Justice, state attorneys general, and the FDIC
resolves all pending civil investigations related to our legacy
RMBS and CDO underwriting, structuring and issuance activities,"
chief executive of Citigroup Michael Corbat said in a statement.
"We also have now resolved substantially all of our legacy RMBS
and CDO litigation. We believe that this settlement is in the
best interests of our shareholders, and allows us to move forward
and to focus on the future, not the past,” added Corbat.
Following the decision the bank reported a share price rise of
3.02 per cent to $48.42.