Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

United States’ third largest bank Citigroup, Inc. (C - Analyst Report) is on shaky grounds again as it has been sued by U.S. Bancorp (USB - Analyst Report) in connection with the sale of securities that were allegedly backed by low-quality mortgages. The mortgage backed securities (MBS) were worth $1.08 billion.

These securities were backed by 4,946 mortgage loans. U.S. Bank has accused Citi of violating the contract with the buyers of the securities. U.S. Bank is seeking compensation for the damages, though no amount has been specified. Moreover, it seeks to obtain an order requiring Citi to repurchase the faulty loans.

As per the trustee, the loans carried a high default rate. Due to this, U.S. Bank incurred losses of over $354 million. Further, a forensic review was done on 1,604 of the mortgages underlying the 2007 investment. The review disclosed that approximately 79% of the loans became delinquent.

Similar Charges Earlier

Washington Mutual Inc. – acquired by JPMorgan Chase & Co. (JPM - Analyst Report) in 2008 – and Citigroup have been legally charged in connection with issues arising out of the sale of MBS by Integer Program LLC for incurring huge losses from mortgage loans.

Further, many other global giants, including Morgan Stanley (MS - Analyst Report), are battling similar lawsuits related to MBS.

Our Take

The mounting litigation charges against Citi are expected to exhaust its financial resources, which otherwise could have been channeled toward the company’s growth initiatives. Moreover, it is apprehended that litigation overhangs might tarnish the company’s image.

Citi currently carries a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%