Sell-side questions $10B penalty for Citi

|By:, SA News Editor

The number seems proportionally well above the $17B amount wanted from Bank of America, notes JPMorgan's Vivek Juneja, and stands against the $4B offered by Citigroup (C -0.3%). It's possible, says Juneja, DOJ uncovered other significant issues or significantly higher loss rates on MBS issued by Citi as opposed to BofA.

In any case, its seems likely Citi will have to book a sizable charge to boost litigation reserves, thus cutting somewhat future capital returns. Near term, says Junjea, the litigation risk combined with weak trading and the slowdown in Mexico (Citi's largest EM) should keep the stock in the penalty box.

Previously: Report: DOJ wants more than $10B from Citi over mortgages

Reiterating its Outperform rating on Citi, Wells Fargo calls the $10B figure too high and says an agreement in the $8B range seem likely, which would cut EPS by $0.95.