Citigroup lawyer says another bank made bigger payment error than Revlon
Citigroup Inc said it was pulling out of consumer banking in 11 markets, including Japan and Egypt, as the U.S. bank with the biggest international business looks to cut persistently high costs. The third-largest U.S. bank, built with a series of acquisitions spanning back to the 1980s, has been trying to slim down since the financial crisis to be as profitable as rivals. It has shed hundreds of billions of dollars of bad assets. Shedding retail businesses in 11 markets may help – stripping out these units would have reduced operating expenses by $1.34 billion over the last year, while reducing net income by only $34 million. The bank said it would exit Costa Rica, Czech Republic, Egypt, El Salvador, Guam, Guatemala, Hungary, Japan, Nicaragua, Panama and Peru, as well as the consumer finance business in Korea. It will continue to serve institutional clients in these markets.
A lawyer for Citigroup Inc (C.N) told a U.S. judge on Friday he was aware of another large bank that recently made a bigger payment error than Citigroup made last August when it sent $894 million of its own money to Revlon Inc (REV.N) lenders.
Neal Katyal, the lawyer, made the disclosure at a hearing in Manhattan federal court, where Citigroup urged U.S. District Judge Jesse Furman to extend a freeze on $504 million that it has been unable to recoup from the Revlon lenders.
Katyal did not identify the bank, the size of the payment error, or whether the error was fixed.
Citigroup is appealing Furman’s Feb. 16 decision that 10 asset managers, whose clients include Revlon lenders, could keep its mistaken payments.
Furman accepted the asset managers’ argument that Citigroup, as Revlon’s loan agent, paid what they were owed, and they had no reason to think a sophisticated bank would blunder so badly.
Citigroup has said the lenders received a “windfall,” and Furman’s decision could steer banks away from doing wire transfers in a “finders, keepers” marketplace.
Katyal is a partner at Hogan Lovells and former Acting U.S. Solicitor General. Citigroup hired him for its appeal.