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Citigroup cut profit forecast on fraud

Friday, February 28 14:50:44

Citigroup said today it has discovered fraud in its Mexico subsidiary and is reducing its previously reported 2013 net income by $235 million.

The company said in a statement the matter involved about $585 million in short-term credit extended by its Banamex unit to Oceanografia SA de CV, a Mexican oil services company that has been a supplier to the Mexican state-owned oil company, Pemex.

The announcement comes after Citigroup shares have fallen in recent weeks on concerns that slowing growth in emerging markets may reveal bad loans, as well as increase the risk of trading losses.

In the third quarter of 2013 problems with about $300 million of loans that Banamex had made to three Mexico homebuilders prompted Citigroup to book reserves for expected losses on the loans.