Citigroup’s C banking subsidiary, Citibank, has been slapped a $25-million penalty by The Office of the Comptroller of the Currency (“OCC”) for violating the Fair Housing Act, while providing mortgage loans under its Relationship Loan Pricing (“RLP”) program.
Under the program, Citi offered reduced pricing for mortgage borrowers that kept assets upto a certain level with the bank, referring it to as relationship pricing.
OCC accused the Wall Street biggie of lacking proper control measures, due to which some eligible borrowers were denied benefits they otherwise deserved. Per the regulator, borrowers have been affected on the basis of their race, color, national origin, or sex.
The matter was self-reported by Citi in 2017, when in a review of internal controls, it found problems in "relationship pricing". The bank had told the regulator that the faults were not deliberate and remedial steps were taken.
OCC said that Citi has already been working on the remedial process and almost completed reimbursement to nearly 24,000 customers who did not receive appropriate RLP benefit. Also, it is undertaking steps to ensure that no violations are committed in the future.
In February 2018, Citi along with six other big banks such as Bank of America BAC, Goldman Sachs GS and Wells Fargo WFC were sued by the city of Philadelphia for colluding to rig the price of floating rate bonds that led to extra interest payments for the city. The matter is currently being investigated by the U.S. Department of Justice.
Though Citigroup has undertaken special measures to combat the rise in expenses, persistent litigation issues will be a headwind for the company. Also, muted fee income growth, owing to dismal performance of investment banking revenues, keeps the top line under pressure.
Over the past six months, the stock has lost 11.5% compared with 7% decline recorded by the industry.
Currently, Citigroup carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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