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Citi Might Face Public Rebuke by Regulators, Resumes Layoffs

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The Office of the Comptroller of the Currency and the Federal Reserve are planning to publicly rebuke Citigroup (C - Free Report) for failing to improve its risk management systems and procedures. The news was reported by The Wall Street Journal.

Shares of Citigroup closed Monday in red (down 5.6%) as investors showed their disappointment on the news.

Per the article, the lender may face a consent order that will make it necessary for Citigroup to take some immediate action and improve its fault controlling systems. Reportedly, the regulators had been asking the bank to improve its systems over the past years, out of the public knowledge. However, Citigroup failed to convince them with the progress made so far.

Further, the Journal stated that the regulators’ expected move expedited CEO Michael Corbat's retirement plans, even though they did not ask him to step down.  

In August, the company had accidently transferred about $900 million to the creditors of renowned cosmetic company, Revlon (REV - Free Report) . The lender was able to recover some of the amounts and had explained it to be a clerical error.

“We are completely committed to improving our risk and control environment," said a spokesperson as quoted by the Journal. "However, while we have made significant and demonstrable progress in each of these areas, we recognize that we are not yet where we need to be and that has to change." he added.

Continuing with its restructuring moves, Citigroup is planning to resume cutting jobs as early as this week, per a Bloomberg article. The cuts will affect less than 1% of the bank’s global workforce. Wells Fargo (WFC - Free Report) is another Wall Street biggie, which has resumed staff reductions.

Also, at the 2020 Barclays Global Financial Services Conference, Citigroup’s chief financial officer Mark Mason provided guidance for the third quarter of 2020. He said that the bank would be accelerating investments in infrastructure and controls with $1 billion in additional investments intended for this year.

Additional reserves, though lower than the previous quarters, are predicted. Also, overall revenues are expected to decline in the high single-digit range on a year-over-year basis. Particularly, fixed income and equity revenues are likely to be up in the low double-digit range year over year, partly offset by low interest rates, reduced levels of consumer activity and subdued investment banking activities.

Mason continues to expect persistent decline or pressure on net interest revenues, along with consumer and the ICG business. Expenses are anticipated to be approximately flat to up slightly in the current quarter from the prior-year quarter.

Shares of the company have gained 16.9% over the past six months compared with the 18.2% growth recorded by the industry.

Citigroup currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A stock worth considering in the finance sector is Bank First National Corporation (BFC - Free Report) . This Zacks Rank #2 (Buy) stock has been witnessing upward estimates revision over the past 60 days. Also, its shares have gained 38.3% in the past six months.

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