Citi says regulators probing trading of sovereign securities

NEW YORK (Aug 4): Citigroup Inc said government and regulatory agencies are investigating the bank’s trading of sovereign and other government-related securities.

The company is cooperating with the probes, according to a regulatory filing on Thursday, which didn’t disclose which agencies are handling the matter.

Separately in the filing, Citigroup said it was forced by sanctions to record a writedown of about US$130 million on the value of Russian sovereign bonds. While the move crimped results, revenue from trading rates and currencies products still soared 66% in the second quarter.

Citigroup has spent months trying to whittle away its exposure to Russia, and the firm has vowed it will ultimately exit both consumer and commercial banking in the country. Even so, the New York-based company saw the dollar value of its exposure to Russia jump to US$8.4 billion in the quarter, which the firm blamed on the appreciation of the ruble.

“Citi continues to perform services for, conduct business with or deal in non-sanctioned Russian-owned businesses and Russian assets,” the bank said in the filing. “This has attracted, and will likely continue to attract, negative attention, despite the previously announced plan to substantially reduce its activities in the country, cessation of new business and client originations, and reduction of other exposures.”

The company also took a US$70 million charge tied to assets in its Russia consumer-banking business, which Citigroup has been seeking to exit for more than a year. The assets included “property, plant and equipment, internally developed software and the ‘right of use assets’ on leased buildings”, the bank said in the filing.

Citigroup also said it has switched its accounting in Turkey to the US dollar, after deeming the economy there to be “hyperinflationary”. The change, put into effect on April 1, came after the three-year cumulative inflation rate exceeded 100% at the end of February, according to the filing.

Citigroup’s net investment in its Turkish operations was US$327 million at mid-year.