On Friday, Citigroup Inc. (C) was sued by the German lender IKB Deutsche Industriebank AG. The complaint lodged claims that Citi misrepresented documents as an underwriter in the sale of over $4.2 million in residential mortgage-backed securities.
According to Dusseldorf-based IKB, Citi issued misleading statements and omissions related to the mortgage-backed securities and breached the contract. IKB has filed lawsuit in the New York State Supreme Court in Manhattan. The company demands for unspecified damages and cancellation of the sale of securities.
Earlier in September, IKB also sued JPMorgan Chase & Co. (JPM) for the sale and breach of contract over the sale of mortgage-backed securities by misrepresenting documents.
In August, Citi’s closest peer, The Goldman Sachs Group Inc. (GS) also faced a number of lawsuits related to mortgage-backed securities. Bond insurer CIFG Assurance North America Inc. alleged that Goldman and its subsidiaries along with M&T Bank Corp. (MTB) issued misleading statements and omissions related to the mortgage-backed securities from a portfolio of 6,204 loans, most of which were made by M&T Bank, which has concealed risks associated with the securities worth $275 million.
Goldman was also sued by The Allstate Corporation (ALL), the largest publicly traded U.S. home and auto insurer for misrepresenting documents in the sale of over $123 million in mortgage-backed securities from April 2006 to March 2007.
The continuous surge in the number of lawsuits will dent banks’ reputation and financial results. However investors, who have lost their hard-earned money in such investments, should feel relieved.
Shares of Citi currently retain a Zacks #5 Rank, which translates into a short-term Strong Sell rating.
ALLSTATE CORP (ALL): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
M&T BANK CORP (MTB): Free Stock Analysis Report
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