Citi warns of rocky first quarter amid federal probes

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Citigroup has a had tough week. With pressure mounting from multiple fraud investigations in Mexico, the U.S. bank is now warning investors of what is shaping up to be a sluggish first quarter.

The drama began on Friday when the bank disclosed that its Mexican unit lost $400 million in a fraudulent loan scam, a crime that may have involved at least one Citi employee. The bank was forced to lower its 2013 figures as a result. Then, in what appears to be a separate matter, Citi acknowledged that the same affiliate has become the target of a federal money-laundering probe.

To top it off, Citi issued some mildly depressing predictions for the first quarter. Revenue is likely to be down across the firm’s consumer banking, trading and investment banking businesses, with fixed income again being the main culprit, chief financial officer John Gerspach told investors. Compared to a year ago, trading revenue will be down somewhere in the "high mid-teens" in terms of percentage, he said.

The situation doesn’t sound quite as dire for Citi’s consumer and investment banking units, which will each see slight dips due to seasonal issues and a surge of M&A deals being completed at the very end of 2013, Gerspach said.

Citi can at least take solace in the fact that it’s not alone when it comes to trading slumps. J.P. Morgan, the bank’s chief fixed income rival, said it expects to suffer roughly a 15% drop in trading during Q1. It’s likely other banks are in a similar position, albeit without the current mess that is Citi’s Mexican banking unit, Banamex.

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