Citigroup Follows JPMorgan as Legal Target, Peabody Says

Citigroup Inc. is poised to be the next U.S. bank to attract legal and regulatory scrutiny as JPMorgan Chase & Co. looks to settle a host of probes, according to an analyst at Portales Partners LLC.

Citigroup’s $5 billion estimate of potential legal costs that weren’t covered by reserves at midyear is second only to JPMorgan, Charles Peabody of Portales said yesterday in a Bloomberg Radio interview. That shows Citigroup may be bracing for more legal challenges, Peabody said.

“It’s very conceivable that Citigroup will be next in the firing line,” Peabody said. “Their litigation costs have been accelerating faster than anyone else’s.” Citigroup is the third-largest U.S. bank by assets and JPMorgan is ranked first. Both are based in New York.

U.S. Attorney General Eric Holder said earlier this month that announcements about banks other than JPMorgan would be made in the coming weeks and months. Citigroup Chief Executive Officer Michael Corbat has seen litigation costs climb to $1.44 billion in the first half of 2013, putting this year on track to be the most expensive for such costs since the financial crisis, according to data compiled by Bloomberg.

Mark Costiglio, a company spokesman, declined to comment. The lender is facing “legacy issues” tied to mortgage products, Chief Financial Officer John Gerspach said in July.

Citigroup’s estimate for potential legal costs rose from $4 billion a year earlier. JPMorgan raised the upper end of its estimate to $6.8 billion from $5.3 billion. Bank of America Corp. reduced its figure to $2.8 billion from $4.1 billion after settling some of its biggest pending cases.

Citigroup’s litigation costs totaled $8.1 billion from 2008 through the end of June, according to data compiled by Bloomberg. That compares with $21.3 billion at JPMorgan and $19.1 billion at Bank of America. Wells Fargo & Co.’s totaled $2.7 billion.

“You’re going to see a continuation of headlines dealing with litigation,” Peabody said.