According to France-Presse, Citigroup, a major US banks, is ready to pay up to $600 million to help its bondholders cover the losses they saw after the housing market crisis. Therefore, the bank decided to satisfy the collective claim in pais.
The announcement was made on August 29th 2012. The statement says that Citigroup still denies its guilt by is ready to make up for investors’ loses in order to avoid further expenses connected with endless trials.
For reference sake, the SEC blamed Citigroup for selling mortgage bonds to the amount of $1 bn in 2007. The financial institution strongly recommended its investors to keep the bonds. However, later the bond defaulted and brought their holders major losses ($700 million) while Citigroup somehow manage to earn $160 million.
The chart below, courtesy of , reflects the current state of affairs in the market of Citigroup’s stock:
Back in 2008, Citigroup, a major US bank, suffered major losses resulted from the recent global financial crisis. In Q1 2012, the bank reported about losing $5,11 bn while the quarterly report for Q1 2007 showed considerable profits ($5 bn).
The reason for such losses was the necessity to write down 39.1 bn in bad assets. Taking into account these losses, Citigroup turned out to be the company that suffered from the global crisis most of all. Citigroup lost more than UBS and Merrill Lynch.
The losses forced Citigroup to change the top management, not to mention mass layoffs – over 6000 jobs. Now Citigroup is planning to reduce 9000 jobs to cut the expenses even further. For reference, Citigroup employs 370 000 people around the globe.
It should be noted that earlier this month, US regulators addressed 5 major US banks - Bank of America, Goldman Sachs, Citigroup, Morgan Stanley and J.P.Morgan Chase – to ask them to work out emergency plans in case they go bankrupt because of a major crisis or recession, especially as these banks cannot count on governmental support any more.
By the way, Citigroup is the 3rd biggest US bank in terms of total assets. It was on the verge of bankruptcy in late 2008. The US Treasury Department supported the bank with a $45 bn bailout, becoming a major shareholder. But2 years later, the US government sold its holdings of Citigroup’s stock.
