Citigroup Inc. struck a $7 billion deal to settle allegations it
sold shoddy mortgages in the run-up to the financial crisis.
The bank said it will pay a total of $4.5 billion in cash and
provide $2.5 billion in consumer relief. The cash portion consists
of a $4 billion civil monetary payment to the U.S. Department of
Justice and $500 million in compensatory payments to the state
attorneys general and the FDIC.
Citigroup will take a charge of about $3.8 billion pretax in the
second quarter. Those results are due at 8 a.m. EDT.
Citigroup's deal with the Justice Department comes after two and
a half months of tense negotiating. Last month, the two sides were
far apart on a potential deal, with the DOJ demanding $10 billion
and Citigroup offering about $4 billion: a discrepancy big enough
to nudge the Justice Department to threaten a lawsuit.
Citigroup was motivated to reach a settlement so it could wrap
the resulting legal charges into second-quarter results. The bank
didn't want to let the overhang of a settlement linger into another
quarter, and it didn't want to be faced with a situation where it
would have to restate its second-quarter results.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires