Citigroup Follows JPMorgan as Legal Target, Peabody Says

Citigroup Inc. (C) is poised to be the next U.S. bank to attract legal and regulatory scrutiny as JPMorgan Chase & Co. (JPM) looks to settle a host of probes, according to an analyst at Portales Partners LLC.
Citigroup’s $5 billion estimate of potential legal costs that weren’t covered by reserves at midyear is second only to JPMorgan, Charles Peabody of Portales said yesterday in a Bloomberg Radio interview. That shows Citigroup may be bracing for more legal challenges, Peabody said.

“It’s very conceivable that Citigroup will be next in the firing line,” Peabody said. “Their litigation costs have been accelerating faster than anyone else’s.” Citigroup is the third-largest U.S. bank by assets and JPMorgan is ranked first. Both are based in New York. Read more.

JPM talks make good headlines, but ...: Ex-Bear CEO

Bear Stearns CEO Alan Schwartz told CNBC Friday that the possible $11 billion number surrounding the JPMorgan mortgage settlement talks "doesn't feel like it makes sense, but it makes good headlines."

Dimon's meeting with Holder follows talks over a possible $11 billion settlement with the government to settle federal and state mortgage investigations. Read more.

The Difference Between You and JPM

This complimentary article from Options Profits was originally published on May 15. Don't risk missing over 40 options trade ideas every week, educational content, exclusive commentary and webinars from over 15 experts.

The resulting activity starting in January of this year (cf. the bottom panels of fig. 1) is, on this theory, the result of JPM selling more 10Y swap protection - bringing in more premium - and not hedging it. Once the price of the index reversed course (top panel), the position started incurring some major losses. Read more.