Citigroup Incorrectly Credits $81T in Client's Account in "Near Miss"

Citigroup, Inc. C accidentally credited a client’s account with $81 trillion when it was supposed to credit only $280. This error could delay the bank’s attempt to influence regulators that it has fixed long-standing operational issues. This was reported by the Financial Times.Details of the Citigroup ErrorThe error took place in April 2024 and was missed by two officials assigned to check the transaction before it was approved for processing. The error was detected by a third employee, working with the bank’s account balances, catching the payment more than an hour after it was posted. The payment was reversed several hours later, according to the Financial Times and two people familiar with the event.In that instance, Citigroup informed the Federal Reserve and the Office of the Comptroller of the Currency that it was a "near miss" because no money left the bank. Citigroup said that these procedures "would have also stopped any funds leaving the bank" and that "detective controls promptly identified the inputting error between two Citi ledger accounts and we reversed the entry." "The error highlights our ongoing efforts to continue eliminating manual processes and automating controls, even though there was no impact on the bank or our client," Citigroup stated.Citigroup’s Prior ErrorsAccording to an internal report seen by the FT, a total of ten near-miss incidents occurred last year when the bank processes the wrong amount but is ultimately able to recover the funds, which amounted to around $1 billion or greater.Last year, Citigroup was hit by British regulators with a $79 million fine over a May 2022 incident when one of its traders sold $1.4 billion worth of stocks on European exchanges, triggering a so-called “flash crash.” The trader meant to sell just $58 million worth of stocks but accidentally issued an order to sell $444 billion, the majority of which was blocked before being sold. In 2020, Citigroup erroneously used its funds to pay off a $894 million loan owned by Revlon, a cosmetics company. Although some of the cash was returned by lenders, ten of them refused to give back the funds.Since near-misses are exempt from reporting requirements to authorities, there is no thorough public record of the frequency of these occurrences in the industry. Near misses of more than $1 billion were deemed exceptional in the U.S. banking sector by several former regulators and bank risk managers.Final Words on CitigroupThis latest error occurred amid C’s attempts to transform and streamline its operations to boost stock price.Citigroup’s CEO Jane Fraser has described fixing its regulatory issues as her “top priority”. However, its string of near-misses demonstrates how Citigroup has been having difficulty resolving its operational issues. Though Citigroup has focused on eliminating the possibility of such incidents, it has been under regulatory scrutiny lately.In July 2024, Citigroup was fined $136 million by the Office of the Comptroller of the Currency and Federal Reserve for failing to correct problems in risk control and data management. The regulators stated that Citi made “insufficient progress” in dealing with the issues identified in 2020, which required it to fix these issues in enterprise-wide risk management, compliance risk management, data governance and internal controls.Earlier in June 2024, another regulatory blow occurred when regulators identified deficiencies in “living wills” submitted by Citigroup describing how the lenders would wind themselves down amid a catastrophic event. The bank has been asked to report to regulators its plans to correct the inadequacies. Moreover, in February, regulators demanded immediate changes from Citigroup in how it evaluates the default risk of trading partners. Additionally, the bank’s auditors have found issues with a proposal to improve internal oversight. Thus, the Fed demanded the company to conduct a “gap analysis” of its risk management framework and internal controls system to determine what enhancements need to be made.Citigroup’s Zacks Rank and Price PerformanceOver the past six months, shares of C have gained 33.3% compared with the industry’s growth of 26.5%.Image Source: Zacks Investment ResearchCurrently, C carries a Zacks Rank #2 (Buy). Other Stocks Worth ConsideringSome other top-ranked bank stocks worth mentioning are BancFirst Corporation BANF and Cullen/Frost Bankers, Inc. CFR.BANF’s earnings estimates for 2025 have been revised upward to $6.52 per share in the past 30 days. The company’s shares have gained 41% in the past year. At present, BANF sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.CFR’s 2025 earnings estimates have been revised upward to $8.86 per share in the past 30 days. The stock has gained 28.9% in the past year. Currently, CFR also sports a Zacks Rank #1.Just Released: Zacks Top 10 Stocks for 2025Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Citigroup Inc. (C): Free Stock Analysis Report BancFirst Corporation (BANF): Free Stock Analysis Report Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks