Citigroup Inc.’s share price down, nears a 7-billion-dollar settlement with the U.S. Justice Department

According to a person close to the process of negotiations, Citigroup Inc., which is currently the third-largest bank by assets in the U.S., may be near an agreement with federal prosecutors. The latter may be signed as early as next week and is expected to close a mortgage-backed bonds sales probe.

As reported by the person familiar with the process, who asked not to be identified because the negotiations are still not public, Citigroup Inc. is expected to pay at least 4 billion dollars under the terms of an agreement with the U.S. Justice Department. The figures rise to 7 billion dollars when including borrower relief like mortgage modifications.

About 4 billion dollars in cash are to be paid to the Department of Justice by Citigroup Inc. In addition, further 3 billion dollars will be paid in mortgage relief to homeowners. The talks between the bank and the U.S. Justice Department are still on the agenda, but if everything is going smoothly, people with knowledge of the matter consider that an agreement could be announced next week.

Such a penalty, however, is a lot bigger than the one initially expected by most analysts in order to resolve the probe. However, an agreement would put an end to the investigation and would reverse the process from mid-June when a warning was made by the U.S. Department of Justice that it considered to file a lawsuit against Citigroup unless it increases its offer significantly.

The Chief Executive Officer at Mystic Asset Management – Mr. Sam Pappas commented for the Wall Street Journal: “Being aggressive, maybe that saves them a little bit of money. But at the end of the day, its in their interest just to get this behind them.”

One of the official representatives of Citigroup Inc. – Mr. Mark Costiglio – refused to make any comments on the banks negotiations with the U.S. Justice Department.

Citigroup Inc. was 1.17% down to close at 47.42 dollars per share yesterday, marking a one-year change of -4.24%. According to the information published on CNN Money, the 29 analysts offering 12-month price forecasts for Citigroup Inc. have a median target of 58.00, with a high estimate of 67.00 and a low estimate of 46.00. The median estimate represents a +22.31% increase from the last price of 47.42.