With an aim to move past the litigation issues, Citigroup Inc. C agreed to resolve a private U.S. antitrust lawsuit that accused it of rigging London Interbank Offered Rate (LIBOR). The company will be paying $130 million to settle the case, without admitting any wrongdoing. This news was reported by Reuters.
In 2011, a group of 27 plaintiffs including cities of Philadelphia and Houston, the National Credit Union Administration Board, Regents of the University of California and Salix Capital Ltd. had accused 16 banks of artificially lowering borrowing costs to ramp up earnings and appear financially healthy. Other than Citigroup, the defendant banks include some big names like Barclays PLC BCS, Bank of America Corp BAC, UBS Group AG and HSBC Holdings plc HSBC.
Decline in borrowing costs resulted in lower LIBOR, which adversely impacted individuals and institutions that invested in the bond market as well as pension funds, mutual funds, money market funds, bank loan funds and several derivative products whose rates are tied to LIBOR.
While initially dismissing the case in Mar 2013, the U.S. District Judge Naomi Reice Buchwald had allowed the plaintiffs to proceed with the same in Aug 2015, based on a “viable legal theory”. Following this, in Nov 2015, Barclays had agreed to pay $120 million to resolve the matter, pending court approval. (Read more: Barclays Agrees to Settle LIBOR Class Action for $120M)
Citigroup spokeswoman Danielle Romero-Apsilos said the company was pleased to settle the matter. The settlement still requires court approval.
Citigroup has been settling lawsuits and regulatory probes with a goal to focus on core operations. As a result, the bank’s financial performance was adversely impacted by higher legal charges.
Nonetheless, Citigroup seems to have resolved majority of litigation matters and now intends to strengthen its core business. With an improving rate scenario and rise in loan demand, the company has been able to improve profitability.
This is getting reflected in Citigroup’s improved share price performance, depicting investors’ optimism for future growth. Over the last six months, the company’s shares have rallied 20.6%, which significantly outperformed the industry’s gain of 5.7%.
Currently, Citigroup carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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