Citibank Wins and Loses This Week – March 2010

An article by pgupta    2 Comments

Citibank had both a good week and a bad week thanks to a court ruling that brought some millions into the company, and a fine due to some problems with the law. Next week, hopefully the bank will be able to recover from some bad press this week.

Citibank had a good week and a bad week depending on how you look at it. First, Citibank was ordered to pay a $1.25 million fine to settle allegations from roughly 35 state governments that stated that CitiFinancial failed to report approximately 91,127 residential mortgage loans to the U.S. government. This is required by law.

According to the Conference of State Bank Supervisors, the error was probably caused by an error in the internal systems of Citigroup that were undetected until bank regulators within Massachusetts looked into the situation. In the examination, it was found that loans made between 2004 and 2007 through Citigroup were not reported and therefore violated the Federal Home Mortgage Disclosure Act.

According to Citibank, the error was accidental and the company was trying to correct reports with the Federal Reserve. Citibank also said that no customers were harmed through the error.

Of course, it was not all bad for Citibank this week. Earlier in the week, $85.7 million was won by the company in a court judgment against Sheldon H. Solow.

The New York State Supreme Court granted the request of Citibank so that Citibank could collect fees and damages from the billionaire real estate developer. The suit stated that Citibank claimed that Solow failed to make payments on $503 million on a line of credit with the bank to develop a site along the East River in New York. The property was to be six apartment towers and a 1.4 million square foot office tower on the 10 acre site.

For Citibank, it was a big win and something to dull the fine that they had to pay to the government for the mortgage reporting problem. Citibank is expecting the weeks ahead to be a bit better as the company has begun to improve its stock standing over the past few weeks. In all, the financial sector has seen big improvements over 52 weeks and is one reason why the market is doing better in 2010 over 2009.

Citibank has been able to recover greatly from some tough times earlier in the 2008 and 2009. Through the foreclosures and problems, things have improved and if this week is any example, the company will be doing even better as time goes on. With a fine from the government, the company was able to rebound by making half a billion dollars in a court judgment thanks to some problems with a developer in New York City. When you lose $1.25 million and bring in $500 million, it is a good week for any company.

Further Reading:

CIT Bankruptcy Possibilities

Citibank Future