Citigroup Inc was forced to revise its earnings for the fourth quarter of 2020 as the company said that it had recorded an additional $390 million in operating expenses during the quarter following a ruling by a federal judge in the United States which barred the banking company from recouping any money from the amount that it had mistakenly transferred last year to lenders of Revlon Inc.
The company said in a filing that compared to its earlier forecast of $2.08 per share, it now said it earned $1.92 per share for the last completed quarter.
According to the company, an “operational error” made by it in August last year resulted in Citigroup sending $893 million of its own funds to the lenders of the cosmetic company which appeared that the bank was paying off a loan which was not due until 2023 when it intended to send only a $7.8 million interest payment.
Till date and at the request of the bank, $389.8 million had been repaid to it. But not all the lenders of the cosmetic company wanted to part with the money they had got which lead Citigroup to start a case to get back the remaining of the mistakenly sent money from a group of hedge funds.
The transfers were complete transactions not subject to revocation, ruled US District Judge Jesse Furman in Manhattan earlier this month, and declined to pass any order that would force the defendants to return the money to the bank.
Citigroup is planning to fight the decision.
“I do believe that we have good grounds for an appeal, and we’re going to pursue that,” Chief Financial Officer Mark Mason said an industry conference.
This latest blunder which has been described as unprecedented because of the amount of money involved is one in a number of misstep involving internal controls at Citigroup. In October, US’s federal regulators had fined the company $400 million because these deficiencies have not been corrected by the bank for a long time.
The planned early retirement of Chief Executive Mike Corbat earlier this month was also a result of the shortfalls in Citigroup’s internal controls, according to analysts. Jane Fraser is set to take over as the new chief of the company.
(Adapted from Reuters.com)