New Checking Fees At... Citibank

Following in Bank of America's footsteps, Citi will unleash a new wave of checking fees in December, reports CNN Money. 

Mid-tier Citibank account holders will now be hit with a $20 fee for failing to maintain a minimum $15,000 balance (it was $6,000 before); and EZ Checking account holders will now pay $15 a month for not maintaining a minimum $6,000 balance.

CNN also reports that the bank is phasing out EZ Checking, replacing it with the option of either a Citibank account or Basic Checking account, which of course carries fees ($10 per month, up from $8 in September) unless these customers maintain a $1,500 minimum balance or make at least one online payment or direct deposit transaction a month.

Read more: http://money.cnn.com/2011/10/04/pf/citi_fee/#ixzz1ZwqHU500

Citi secures bids for consumer finance arm CitiFinancial

Citigroup has drawn a step closer to selling its consumer finance business, securing at least three bids of about $2bn from private equity groups.

The division traces its roots to Commercial Credit, the building block upon which Citi’s former chairman, Sandy Weill, built his financial empire. Yet when the bank set aside businesses and assets that did not fit its post-crisis strategy, the unit – named until recently CitiFinancial – was among those targeted for disposal. Last week at least three private-equity consortiums submitted bids in the second round of Citi’s auction for the business, according to people familiar with the matter. The bank will hold a third round before asking for final bids, the people said.

One group included Blackstone Group, Carlyle and Brysam Global Partners, the group run by former Weill lieutenants Robert Willumstad and Marjorie Magner, said those close to the situation. Clayton Dubilier & Rice and Onyx comprise a second consortium, while Apollo Management and JC Flowers were part of a third group, the people said.

The consortia submitted bids that either came close or met Citi’s asking price of $2bn, the business’s book value.

While the offers underline mounting demand for consumer finance businesses, many of the would-be buyers remain sceptical that they can solve the main challenge that has confounded many lenders since the crisis: how to fund a finance company that cannot attract cheap deposits.

In August, Fortess Investment Group bought 80 per cent of AIG’s consumer finance arm, American General Finance, for a fraction of the division’s $2.1bn book value. AIG recorded a $1.9bn loss on the sale.

Lingering uncertainty surrounding CitiFinancial’s funding – and Citi’s price expectations – prompted at least one potential acquirer, Warburg Pincus, to lose its enthusiasm for the deal. For its part, Citi had indicated it would be willing to help finance the division for a time after the sale, the people said.

The bank has closed more than 300 CitiFinancial branches, stopped making loans at 184 more and rechristened the remaining 1,500 OneMain Financial. The division has about 2m customers. The sale would mark yet another departure from the strategy embraced by Mr Weill, who built the former Commercial Credit into the largest US consumer finance company. In 2000 he paid $31bn to acquire Associates First Capital, another consumer lender.

Not long after Mr Weill took control of Consumer Credit in 1986, he persuaded a pair of Chemical Bank executives, Mr Willumstad and Ms Magner, to join him in Baltimore to help run the business.

Citigroup ordered to pay Dallas star Larry Hagman $11m

Citigroup is to pay Larry Hagman, star of US television series Dallas, over $11 million after losing a dispute over the handling of his accounts.

An arbitration panel from the Financial Industry Regulation Authority (FINRA) made the ruling after the actor, made famous by his portrayal of villain JR Ewing during the long-running US series, filed the complaint in May 2009.

He claimed that the investment bank had breached contract, fiduciary duty, committed fraud by misrepresentation and violated federal security laws in relation to funds held in various accounts.

The claim was made over “unspecified securities” and a life insurance policy.

Under the terms of the settlement, the financial services provider will pay $10 million to a charity of Mr Hagman’s choice and a further $1.1 million directly to the star.

An additional $440,000 will be paid to cover legal fees while another $20,000 will be used to fund administrative costs.

A spokesperson for Citi said: “We are disappointed and disagree with the panel's findings, and we are reviewing our options.”

Mr Hagman first rose to stardom through his portrayal of astronaut Anthony Nelson in US series I Dream of Jeannie.

Citigroup stake sale nets $1bn profit for Treasury

The US Treasury has made a profit of just over $1 billion from its sale of a five per cent stake in Citigroup.

Since July 26th, the Treasury has got rid of 1.5 billion shares in the financial institution, netting $5.9 billion in the process.

It paid $3.25 per share when it took on a stake in Citigroup at the height of the financial crisis, but the recent sales have taken place at an average of $3.93 per share, reports Bloomberg.

The Treasury's stake in Citigroup now stands at around 12 per cent and is worth about $14 billion.

However, plans to divest itself of the shares by the turn of the year are behind schedule, with the Treasury only managing to sell around 31 million shares per day, less than half of its target.

Earlier this week, AIG announced its plans to repay the Treasury in full for the bailout funding it received as a result of the financial crisis.

Treasury continues to unwind its stake in Citigroup

The Treasury Department plans to sell trust-preferred securities in Citigroup as it moves ahead with an effort to extricate itself from the banking giant. The government obtained the securities when it entered an agreement to share in losses on some Citi assets. The Treasury did not say how much of its $2.2 billion in securities it will sell or at what price.

By July, the Treasury said it had sold 2.6 billion of the 7.7 billion common shares it owned, in incremental sales usually amounting up to 10% of daily trading volume. But its hope of ridding itself of all its Citi common stock by the end of the year appears to be fading. Trading volume in Citi's stock has been lower over the summer than in the spring, reducing the amount the Treasury can sell without affecting Citi's stock price.

Unless the daily volume of Citi stock jumps considerably, it is unlikely that the Treasury will complete the sale of all its common stock this year, unless it changes course and conducts a block sale of shares.

http://online.wsj.com/article/SB10001424052748704116004575521743686650092.html

Citigroup Says StepStone Will Run Private-Equity Unit

(Bloomberg) -- Citigroup Inc. will transfer management of a group of in-house private-equity funds to StepStone Group LLC and sell interests in its funds to Lexington Partners Inc. as part of a plan to shrink the bank’s assets.

StepStone, based in La Jolla, California, will take over management of $4 billion in funds-of-funds and buyout co- investments previously run by the Citi Private Equity unit, the New York-based bank said today in a statement. New York-based Lexington will buy Citigroup’s interests in the funds, according to the statement. Terms of the deal, scheduled to close in the fourth quarter, weren’t disclosed.

Citi Private Equity was formed in 2000 and had about $10 billion under management as of January including the firm’s own investments. The unit was among more than two dozen businesses that Chief Executive Officer Vikram Pandit, 53, tagged for sale or shutdown in early 2009.

“Citi will continue to pursue opportunities to divest non- core assets,” the bank said in the statement. The deal will reduce the size of Citigroup’s balance sheet by $1.1 billion. As of March 31, the bank had $2 trillion of assets.

A “significant number” of Citi Private Equity’s employees are expected to join StepStone and Lexington, with some remaining at Citigroup, according to the statement.

Citigroup will retain management of employee investment funds that were managed by Citi Private Equity, according to the statement. The bank also will retain “certain proprietary interests” in the employee funds.

Citigroup is raising cash for alternative funds

As lawmakers finish work on reform legislation that would change much of the industry, Citigroup is moving forward with a capital-raising plan for its alternative funds, sources said. "Citi must be comfortable enough that whatever happens, even in the extreme version, they'll be able to move ahead with these businesses," said Steven Kaplan, a professor at the University of Chicago Booth School of Business. "I don't think any of these bills envisioned not being able to manage someone else's money. It's the bank capital that's still an open question."

http://www.businessweek.com/news/2010-06-18/citigroup-looking-past-volcker-may-seek-3-billion-for-funds.html

Citi to raise $3bn for PE and hedge units

Source: AltAssets

US financial services conglomerate Citigroup is planning to raise over $3bn for its private equity and hedge funds, according to Bloomberg.

In spite of looming US regulations that may prohibit banks from dealing in alternative investment asset classes, Citi may seek to raise $1.5bn for private equity and $750m for hedge funds this year. An additional $1bn may be targeted for hedge funds next year.

Although regulators are convening in Washington to unify the House and Senate bills on Wall Street regulation, Citi is to press ahead with plans to raise capital for their in-house management teams.

The possible regulation could bar banks from investing in private equity, as well as prohibit them from raising their own funds, or trading in stocks, bonds or commodities on their own account.

Even if the rules are passed, it could take up to six years to fully implement them, giving Citi and other banks some breathing space. However, the bank has started to reduce its exposure to alternative asset classes, selling off a $12.5bn real estate fund and a $4.2bn hedge fund of funds last year.

Citi currently has around $5bn of its own cash in its Citi Capital Advisors alternatives arm, formerly known as Citi Alternative Investments before the crash led to $80bn worth of funds being shuttered or frozen, leading to $3bn of losses for the bank.

Citigroup probes rumor that trade error triggered Dow drop; CME says no system problems

(Reuters) — Citigroup is investigating a rumor that one of its traders entered a trade that helped precipitate a drop of almost 1,000 points in the Dow Jones Industrial Average, a spokesman for the bank said on Thursday.

Citigroup, the third-largest U.S. bank, currently has no evidence that an erroneous trade has been made, the spokesman said.

Earlier, sources told Reuters that the plunge in the Dow Jones Industrial average — its biggest intraday point drop ever — may have been caused by an erroneous trade entered by a person at a big Wall Street bank.

Market sources said the erroneous trade may have involved shares of the so-called E-Mini, a stock market index futures contract that trades on the Chicago Mercantile Exchange's Globex trading platform. The composition of the E-Mini is similar to the stocks in the S&P 500.

A CME spokesman said it found no problems with its systems.

Other market sources said the erroneous trading involved the IWD exchange-traded fund or the S&P 500 Mini. A person close to BlackRock, which manages the IWD, said there was no unusual trading in the iShares product.

Amid the sell-off, Procter & Gamble shares plummeted nearly 37 percent to $39.37 at 1:47 p.m. Central time, prompting the company to investigate whether any erroneous trades had occurred. The shares are listed on the New York Stock Exchange, but the significantly lower share price was recorded on a different electronic trading venue.

"We don't know what caused it," said Procter & Gamble spokeswoman Jennifer Chelune. "We know that that was an electronic trade ... and we're looking into it with Nasdaq and the other major electronic exchanges."

A different P&G spokesman had said earlier the company contacted the Securities and Exchange Commission, but Chelune said that he spoke in error.

One NYSE employee leaving the Big Board's headquarters in lower Manhattan said the P&G share plunge lay at the center of whatever happened.

"I'll give you a tip," the employee said, speaking on condition of anonymity. "P&G. Check out the low sale of the day. Something screwed up with the system. It traded down $30 at one point."

Nasdaq said it was working with other major markets to review the market activity that occurred between 1:00 p.m. and 2:00 p.m. Chicago time, when the market plunge happened.

The exchange later said it was investigating potentially erroneous transactions involving multiple securities executed between 1:40 and 2:00 p.m.

Nasdaq also said participants should review their trading activity for potentially erroneous trades.

New technology platform launched by Citigroup and Morgan Stanley joint venture

Morgan Stanley Smith Barney is to launch a new trading platform for bankers as part of an overhaul of its back-office technology.

According to the Wall Street Journal, the new 3-D platform will offer financial advisors the opportunity to work out of the office due to being a web-based program.

The technology, which is expected to provide support to advisors as part of a back-office solution as well as enabling them to open up new accounts and undertake transactions, will also be overhauled as part of the initiative.

Sean Cunniff, research director at TowerGroup, told the news provider: “Web-based platforms are a lot more accessible to advisers when they are working from home or on the road.

“They also generally have a more modern architecture and much better user interface.”

Robert Ellis, principal at Fast Track Advisors, added: “[These products allow] them to go out and meet with clients and potential clients more, rather than just sitting at their desk waiting for clients to come to them.”

The news provider added that the changes are part of the continuing integration between Citigroup and Morgan Stanley as a joint venture.

Morgan Stanley and Citgroup unveiled their plans to collaborate in January of last year.

Citigroup fined $650,000 by FINRA

Citigroup has received a fine of $650,000 for violations made in the operation of its Direct Borrowing Program (DBP).

The Financial Industry Regulatory Authority (FINRA) imposed the penalty on the investment bank for failures in disclosure and supervision relating to ‘hard-to-borrow’ securities.

An investigation by FINRA found that Citigroup’s DBP borrowed over 770 securities from over 2,300 clients which were used in the group’s short selling strategy.

The organisation was found to have failed to provide clients with sufficient information relating to the DBP.

According to FINRA, participating clients were not informed that they could face higher taxes through lending or that brokers would receive commission for the duration of the loan.

James S Shorris, FINRA executive vice-president and executive director of enforcement, said: “Before offering a product to customers, brokerage firms must reasonably ensure that the customers are aware of all of the potential risks associated with the transaction.

“In this case, Citigroup failed to maintain a supervisory system that ensured that such disclosures were made to customers by the firm's registered representatives and in the firm's marketing materials.”

The investigation focussed on securities lent between January 1st 2005, and November 30th 2008.

Citigroup fined $1.25m for loan reporting mistakes

Citigroup has received a $1.25m fine for failing to report over 90,000 loans to federal government in the US.

The investment bank’s CitiFinancial unit is accused by authorities in 35 states of not disclosing 91,127 loans originating between 2004 and 2007.

According to the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, the subsidiary of the group has agreed to pay the full fine.

An internal system error was blamed for the failure of Citigroup to make the authorities aware of the loans.

Steven Antonakes, Massachusetts' commissioner of banks, was quoted by Reuters as saying: “HMDA remains the primary tool we use to ensure compliance with fair lending laws and regulations.

“By failing to accurately report all required transactions, CitiFinancial hampered our ability to complete that assessment.”

The investment banking group explained that the error was an unintentional mistake and no customers had been harmed.

Lenders must inform the authorities of the number of loans they provide as part of the government’s Home Mortgage Disclosure Act.

Banking regulators in Massachusetts were the first to discover the error by the group.

Former-Citigroup executive employed by E*Trade

Steven Freiberg, formerly chief executive officer (CEO) at Citigroup’s global consumer offshoot, has been appointed CEO at online broker E*Trade.

According to the financial service provider, the 53 year-old previously worked at the bank for 30 years on a range of products including investment products and consumer finance.

Mr Freiberg also worked as CEO and chairman of Citirgroup’s Citi Cards and Investment Products units.

Robert Druskin, chairman at E*Trade, explained that the company had employed the executive due to his “extensive experience” in developing business strategy and working on consumer finance.

Mr Freiberg said: “E*TRADE is an extraordinary company with a powerful brand and a compelling customer value proposition.

“Bob Druskin and Don Layton, his predecessor, did a terrific job leading the company through very challenging times and positioning the organization for success.”

Mr Druskin, who has been interim CEO, will continue to remain on E*Trade’s board as chairman.

Meanwhile, the company is also looking for the approval of shareholders to implement a 1-for-10 reverse stock split.

A vote on the issue, which would reduce the number of shares to 400 million, will be held at the firm’s forthcoming annual general meeting in May.

Citigroup plans to sell hedge fund business

Citigroup is in talks with SkyBridge Capital to sell its hedge fund business worth $4 billion.

An unnamed source told the Wall Street Journal that the investment banking group is thought to be in “advanced talks” with the organisation, which is run by two former traders from Goldman Sachs.

Assets in the fund include $2.5 billion which Citi advises on, $500 million in capital tied to hedge fund stakes and $1 billion worth of hedge fund investments.

Details of the deal, including how much SkyBridge would be willing to pay, have yet to be disclosed, the news provider reported.

Citigroup announced during 2009 that it would be looking to offload $715 billion worth of assets in a bid to reduce its exposure to risk and the bank is thought to still have more than $500 billion to shift.

According to the news provider, Citigroup has sold a number of assets including stakes in the Japan-based Nikko Cordial securities and Nikko asset-management businesses.

The sale of its Smith Barney brokerage business and consumer finance businesses in Portugal, Italy and Norway have also taken place as the bank attempts to recover in the wake of the global financial crisis.

Fund-of-fund investments in Citigroup increased in 2009 by more than 20 per cent, the news provider stated.