It’s been a challenging year for Citigroup and its subsidiaries. With lawsuits, unexpected firings behind closed doors and new replacements that no one saw coming, it could be said Citi is evolving yet again into an entirely different financial entity. It’s been several months since Citigroup’s new CEO Michael Corbat was named and since then, he’s opted for quite a few changes and shakeups, including internal shake ups. On Monday, he announced two co-presidents that would team up to serve the banking conglomerate’s current and future goings-on. Those two co-presidents are Jamie Forese and Manuel Medina-Mora and according to Corbat, the duo will work side by side on all things related to the banking considerations with the company.
In a presser released after the announcement, a bank spokesperson said Forese will be responsible for all of the bank’s institutional businesses and operations; meanwhile, Medina-Mora will continue in the role of overseeing Citi’s global consumer banking as well as its Mexican interests. Both have extensive experience and the decisions were strategic.
Better Service for Consumers
It will allow certain banking areas to evolve to better serve consumers and the bank. Those areas include technology and operations.
Jamie and Manuel have both spent their entire careers at Citi and its predecessor companies, and they exemplify the best of Citi,
Corbat said in the Citi presser. You may recall Corbat was tapped almost immediately after its former CEO Vikram Pandit was fired last summer. As soon as the Board released Pandit, it simultaneously named Corbat as his replacement.
But tapping two new head leader positions wasn’t the only employment shift it announced. Citi also selected the very experienced executive Jim Cowles to become CEO of the company’s Europe, Middle East and Africa region. Its new head of franchise for risk and strategy was named, too. Brian Leach will be overseeing that aspect and will be responsible for the auditing considerations, its compliance regulations, corporate strategy and functions. Another new shift, also in risk management, means Brad Hu will transition from his current position as head of risk for the Asia Pacific region into the financial entity’s chief risk officer.
Letter to Employees
In Corbat’s memo to his employees, he says,
The three months I have been CEO have been memorable to say the least, and I am very proud of what we have done to prepare for 2013…Today, we will submit our capital plan to the Federal Reserve.
Independent Foreclosure review
Before the day was finished though, Citi had another press release. This time, it was based on the agreement in principle reached with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board regarding the Independent Foreclosure Review process. The presser said that the bank was collectively
pleased to have the matter resolved…this agreement is a positive development that will provide benefits for homeowners.
It’s believed a pre tax charge could hover near $305 million for its fourth quarter, which is its cash payment of the settlement. Plus, Citi says it expects its approximately $500 million share of the loss mitigation or other foreclosure prevention actions will be made up in loan repayments, which could mean Citi will feel absolutely no financial impact. Its 2012 fourth quarter results should be released next week. Some are optimistic, even as other think those results won’t be as impressive as some are hoping for.
Even Corbat is cautiously optimistic in Monday’s letter to employees. He says he knows the next year will be challenging and reiterates to those employes that “We will be tested in the year ahead.” He went on to say that the economic environment will see those challenges in a number of ways from many avenues. He also said he would rely on “every person in this company” to ensure the new year is successful. It’s likely he was building up morale, especially considering the bank had been hit with yet another lawsuit the week before.
Judge David N. Hurd of the United States District Court for the Northern District of New York stated a class action lawsuit would be allowed to move forward. Citibank is listed as one of several defendants and the accusations are that it and the others forced unreasonably priced flood insurance policies on consumers around the nation. Plaintiffs Gordon Casey and Duane Skinner allege that Citibank and others routinely force-placed unnecessary flood insurance coverage above the amounts required by the homeowners’ contracts. The banks, including Citi, say they are allowed to price their flood insurance in way they choose and that the lawsuit is frivolous. Ah….but it’s not that simple, especially when part of the lawsuit rotates around other issues, specifically federal laws that the plaintiffs say the banks trampled on.
Citi did get a bit of a break when the judge said that claims alleging violation of Truth in Lending, breach of fiduciary duty, violation of New York Deceptive Practices act wouldn’t be allowed in the suit. Still, it’s a blow for banks around the nation who seem to be battling multiple lawsuits coming from a number of avenues.
One lawyer referred to the accusations as a classic bait and switch and that borrowers were told about one set of requirements for approval only to discover new guidelines when they showed up at their closings. The lawsuit alleges thousands of borrowers have been harmed financially due to the “extraordinarily high prices”. Not only that, but the suit also claims that the banks and insurance companies were both working together to defraud would-be homeowners. Shannon Carson of Berger & Montague, P.C., one of the lead attorneys for the plaintiffs, said “each time the banks require such insurance, they receive lucrative financial benefits from the insurance companies who place the flood insurance policies.”
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