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Citigroup To Pay $400M Risk Control Fine
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Citigroup To Pay $400M Risk Control Fine

Citigroup agreed to pay a penalty of $400 million after U.S. regulators identified several risk control issues and operational lapses within the company. The bank was fined due to its “unsafe or unsound banking practices for its long-standing failure to establish effective risk management and data governance programs and internal controls,” according to a statement by the US Office of the Comptroller of the Currency (OCC). 

The OCC agency issued a cease-and-desist order against Citigroup (C) “requiring the bank to take broad and comprehensive corrective actions to improve risk management, data governance, and internal controls.” The OCC also demanded that the bank seeks its approval before making “significant new acquisitions.”

Citigroup said in a statement on Wednesday that “We are disappointed that we have fallen short of our regulators’ expectations.” The bank also said that it “has significant remediation projects underway to strengthen our controls, infrastructure and governance.”  (See C stock analysis on TipRanks)

On Sept. 18, Jefferies analyst Ken Usdin lowered the price target on Citigroup to $52 (16% upside potential) from $60 and maintained a Buy rating. Usdin believes that the firm has re-established itself among the best global banks in recent years and has gained the top position in global treasury (TTS). The analyst added that “Global uncertainty and low rates are headwinds, but the shift towards globalization is not abating despite the headlines.” He believes that improving risk management infrastructure should be the company’s top priority.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 15 Buys, 1 Hold and 2 Sells. The average price target of $66.10 implies upside potential of about 47.4% to current levels. Shares have declined about 43.9% year-to-date.

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