Citigroup Pressed with Allegations - Analyst Blog
September 27 2011 - 4:48AM
Zacks
On Friday, Citigroup Inc. (C) was sued by the
German lender IKB Deutsche Industriebank AG. The complaint lodged
claims that Citi misrepresented documents as an underwriter in the
sale of over $4.2 million in residential mortgage-backed
securities.
According to Dusseldorf-based IKB, Citi issued misleading
statements and omissions related to the mortgage-backed securities
and breached the contract. IKB has filed lawsuit in the New York
State Supreme Court in Manhattan. The company demands for
unspecified damages and cancellation of the sale of securities.
Earlier in September, IKB also sued JPMorgan Chase &
Co. (JPM) for the sale and breach of contract over the
sale of mortgage-backed securities by misrepresenting
documents.
In August, Citi’s closest peer, The Goldman Sachs Group
Inc. (GS) also faced a number of lawsuits related to
mortgage-backed securities. Bond insurer CIFG Assurance North
America Inc. alleged that Goldman and its subsidiaries along with
M&T Bank Corp. (MTB) issued
misleading statements and omissions related to the mortgage-backed
securities from a portfolio of 6,204 loans, most of which were made
by M&T Bank, which has concealed risks associated with the
securities worth $275 million.
Goldman was also sued by The Allstate
Corporation (ALL), the largest publicly traded U.S. home
and auto insurer for misrepresenting documents in the sale of over
$123 million in mortgage-backed securities from April 2006 to March
2007.
The continuous surge in the number of lawsuits will dent banks’
reputation and financial results. However investors, who have lost
their hard-earned money in such investments, should feel
relieved.
Shares of Citi currently retain a Zacks #5 Rank, which
translates into a short-term Strong Sell rating.
ALLSTATE CORP (ALL): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
M&T BANK CORP (MTB): Free Stock Analysis Report
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