NEW YORK — Citigroup said Tuesday that it will incur charges of $3.5 billion in the fourth quarter to cover legal and restructuring costs.
The bank will allocate $2.7 billion of that amount to cover legal costs associated with investigations into currency trading, the manipulation of a key interest rate, as well as anti-money laundering and related probes. The remaining $800 million will be spent reducing the bank’s headcount and cutting its real-estate holdings.
Like other U.S. banks and financial institutions, Citi is still grappling with the fallout from the financial crisis and the tougher regulatory scrutiny that the industry is facing in the aftermath.
Citi’s CEO Michael Corbat said in a statement announcing the charge that the bank’s legal woes may now be nearing an end. He also said that, despite the charge, he still expected the bank to turn a profit in the quarter.
“These legal charges should cover a significant portion of our outstanding legal matters based on current information,” Corbat said.
The bank’s stock slumped on the news, falling $1.38, or 2.4 percent, to $54.98. The drop put the stock on track for its biggest slump in two months.
The charge is the latest in a long list of legal cost incurred by the bank.
In October, Citigroup was forced to cut its third quarter earnings by $600 million because of higher legal costs associated with regulatory investigations. In July, Citi agreed to pay $7 billion to settle a federal probe into its handling of risky subprime mortgages. The bank acknowledged misrepresenting residential mortgage-backed securities that later plunged in value.
The bank will report its fourth quarter earnings on Jan. 15, 2015.
BY STEVE ROTHWELL, AP Business Writer