New Regulatory Communications Slap Citi Earnings and Ratios Lower

This effort is not just lowered preliminary earnings. It lowered book value and capital ratios.

Citigroup said the lower earnings are due to a $600 million increase in legal accruals. Citi said, “The increase resulted from rapidly-evolving regulatory inquiries and investigations, including very recent communications with certain regulatory agencies related to previously-disclosed matters.”

The financial impact lowers Citi’s third-quarter 2014 net income from $3.4 billion to $2.8 billion. As this was disclosed in the 10-Q filing, it now takes earnings per share down to $0.88 from $1.07, and it lowers the firm’s Tier 1 Capital Ratio to 10.66% from 10.74%. Also, the firm’s book value was lowered to $67.11 from $67.31 per share.

This is one of those situations that we are calling a restatement, although technically it might be considered a formal restatement only if the company had already filed its 10-Q and then had to go back and adjust that filing.

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Citigroup shares closed up almost 1% at $53.15, against a 52-week range of $45.18 to $55.28, and shares were down 2% at $52.05 in the after-hours reaction. Stay tuned.