Banking giant Citigroup cut its fourth quarter and full year 2013 estimates on Friday, as its profit was hit by fraudulent activity at a Mexico-based subsidary.
The bank said in a statement that Banco Nacional de Mexico, or Banamex, had loaned $585 million in short-term money to a Mexican oil services company named Oceanografia. It was later discovered that the firm had been suspended by the government from being awarded new contracts,
"Based on Citi's review...Citi estimates that it is able to support the validity of approximately $185 million of the $585 million of accounts receivables owed to Banamex by Pemex as of December 31, 2013," the bank added.
As a result of the incident, Citi will take an estimated $235 million after-tax, or $360 million pre-tax, charge against last year's earnings. The impact will lower 2013 net income from $13.9 billion to $13.7 billion.
Citi said it believed the fraud was "isolated to this particular client," but added that its review was ongoing. The bank expects it will determine "whether any or all portion of the $33 million of direct loans made to [Oceanografia], and the remaining approximately $185 million of accounts receivable due from Pemex is impaired."
The news was a new hit for the Wall Street giant, which—five years following the 2008 financial meltdown—has yet to reach escape velocity from the crisis that nearly collapsed the global financial system.
Citi was among the last to repay its bailout money in full, and in subsequent years has struggled with issues related to management and strategy. The bank, which originally pioneered the concept of a full service financial supermarket, has been weighed by weakness in key business areas such as mortgages and fixed-income trading.
Banking giant Citigroup cut its fourth quarter and full year 2013 estimates, as profit was hit by fraudulent activity at a Mexico-based subsidary.