Citigroup expenses bring total to $13 billion on Corbat's watch

Citigroup Inc's fourth-quarter legal expenses and costs for shrinking the business will bring the total for those items under Chief Executive Officer Michael Corbat to $13.3 billion, more than half of the bank's earnings in his 26-month tenure.

Corbat, 54, said on Tuesday the New York-based bank will report $2.7 billion in quarterly legal expenses, the most since he became CEO in October 2012, data from company reports show. An estimated $800 million in costs to dismiss workers and close branches and offices will be the most since the quarter when Corbat succeeded Vikram Pandit in the CEO role.

Wall Street firms including Citigroup have faced sliding revenue from fixed-income trading, once a key profit engine, and escalating legal costs. Corbat said the bank's legal costs are tied to investigations into alleged manipulation of currency and interest-rate benchmarks as well as the bank's controls against money laundering.

"We've tried to put our best estimate on what those numbers should be like, and try and really shoot for a clean 2015," Corbat said at an investor conference in New York, referring to the legal costs. The bank will be "marginally profitable" in the quarter, he added.

Costs for cutting jobs and offices should "come down considerably" next year, Corbat added.

Citigroup adjusted its third-quarter earnings lower on October 30, two weeks after the numbers were initially reported. The company added a $600 million legal charge that it attributed to "rapidly evolving regulatory inquiries and investigations."

FX Probes
Last month the bank agreed to pay $1.02 billion to settle a probe into currency manipulation with three regulators in the U.S. and U.K., the biggest of six firms involved in the accord. The bank has said it's cooperating with the U.S. Justice Department, which is pursuing criminal currency-rigging cases against multiple banks.

In March, Citigroup said its Banamex USA business, part of the bank's Mexican unit that disclosed a $400 million loan fraud this year, had received subpoenas related to compliance with the Bank Secrecy Act and federal anti-money-laundering rules.

Citigroup slid 1.4 percent to $55.61 at 1:56 p.m. in New York, the worst performance in the 24-company KBW Bank Index. The shares have gained 6.7 percent this year.

The fourth-quarter legal costs compare with the $1.55 billion reported by the bank for the third quarter when the $600 million charge is included. The bank set aside $1.29 billion in the fourth quarter of 2012.

Corbat is seeking to trim expenses after years of acquisitions and mismanagement created a bloated infrastructure and inflated staffing levels. The company's restructuring expenses have totalled $3.4 billion since he became CEO, including costs linked to a portfolio of assets the bank has tagged for sale. Corbat said today the effort will lead to $3.4 billion in savings.

The bank has earned $21.8 billion in the eight quarters since Corbat became CEO, according to company reports.