Citigroup may pay $7bn to resolve US probe

New York/Washington - Citigroup Inc is close to paying about $7 billion to resolve a US probe into whether it defrauded investors on billions of dollars worth of mortgage securities in the run-up to the financial crisis, a source familiar with the matter said on Tuesday.

A majority of the settlement is expected to be in cash, but the figure also includes several billion dollars in help to struggling borrowers, the source said.

People exit a Citibank branch in New York. Credit: Reuters

An announcement of the settlement between the bank and the US Department of Justice could come as early as next week, the source said.

A Citigroup representative declined comment.

A Justice Department spokeswoman did not respond to requests for comment.

A settlement of around $7 billion for Citigroup would be higher than analysts had expected based on the bank's mortgage securities business.

Some Wall Street analysts had previously estimated that Citigroup likely had about $3 billion of reserves set aside for a related settlement.

US authorities had demanded more than $10 billion last month, Reuters reported.

Talks between US authorities and Citigroup stalled last month after both sides stood far apart on a settlement figure and the Justice Department had prepared to sue the bank.

The bank is scheduled to report second-quarter results on Monday.

Analysts, on average, have estimated the company would earn $3.4 billion.

US Attorneys offices in Brooklyn and Colorado have been investigating the bank as part of a larger task force probing faulty mortgage securities that helped fuel the housing bubble in the mid-2000s and contributed to its collapse.

JPMorgan Chase & Co paid $13 billion in November to resolve a range of probes from the task force, in a deal that US authorities said would serve as a template for other banks.

Bank of America Corp has also been in negotiations to resolve similar investigations. - Reuters