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Citi to settle legacy securities claims, incur $100 million charge

A man walks past a Citibank branch in lower Manhattan, New York October 16, 2012. REUTERS/Carlo Allegri
A man walks past a Citibank branch in lower Manhattan, New York October 16, 2012. REUTERS/Carlo Allegri

(Reuters) - Citigroup Inc said it would pay $1.12 billion in cash to settle legacy securities and other claims and incur a related charge of $100 million in the first quarter.

The bank reached the agreement with 18 institutional investors and said the settlement had resolved a significant issue left over from the financial crisis.

Citi has offered the settlement to the 68 Citi-sponsored mortgage securitization trusts that participated in the $59.4 billion residential mortgage-backed securities.

Separately, the institutional investors have asked the trusts to accept the offer, which they have till June 30 to accept.

Established by Citi's legacy securities and banking business during 2005-2008, these residential mortgage-backed security trusts were represented and warranted by Citi affiliates.

The settlement, the latest among a series of similar deals in the recent past, comes as the U.S. banking industry tries to manage its way out of the housing bubble that led to the financial crisis.

Last year, a federal judge approved a settlement in which Citi agreed to pay bondholders $730 million to resolve claims that the bank concealed its exposure to billions of dollars of toxic mortgage assets prior to the financial crisis.

Citigroup stock closed down about 1.2 percent at $46.55 on the New York Stock Exchange on Monday.

(Reporting by Avik Das and Shubhankar Chakravorty in Bangalore; Editing by Ken Wills)

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