Home >> Daily Dose >> RMBS Settlement Eats Up Citi’s Q2 Profits
Print This Post Print This Post

RMBS Settlement Eats Up Citi’s Q2 Profits

cutting-moneyCitigroup's second-quarter profits took a major hit as the bank announced a settlement with the government to resolve securities claims.

Citi released its quarterly earnings report Monday morning, posting net profit of $181 million—a decline of 96 percent compared to earnings of $4.2 billion a year ago.

The second quarter's results include a $3.8 billion charge related to a $7.0 billion settlement with the Residential Mortgage-Backed Securities (RMBS) Working Group, also announced early Monday.

Under the terms of the agreement, the bank will pay a total of $4.5 billion in cash, including a $4 billion payment to the Justice Department and $500 million in payments to state attorneys general and FDIC. The remaining $2.5 billion will be provided through consumer relief by the end of 2018.

The settlement brings to any real claims and investigations into Citi's RMBS and collateralized debt obligations (CDOs) issued, structured, or underwritten between 2003 and 2008.

In a statement, Citigroup CEO Michael Corbat said that with the agreement, Citi has now resolved "substantially all" of its 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," Corbat said.

Even removing the settlement charge, Citi's Q2 earnings would have come to $3.9 billion, short of last year but in line with Q1’s results.

The bank's North American Global Consumer Banking income came to $1.1 billion, "broadly flat" from last year as lower operating expenses, a decline in net credit losses, and a higher loan loss reserve helped offset lower revenues stemming from waning mortgage refinancing activity.

x

Check Also

Positive Home Sales Growth in California

Falling mortgage rates and declining home prices led to a good month in the Golden State. Click through to see the increases in home sales.

GET THE NEWS YOU NEED, WHEN YOU NEED IT.

With daily content from MReport, you’ll never miss another important headline in originations, lending, or servicing. Subscribe to MDaily to begin receiving a complimentary daily email containing the top mortgage news and market information.