The recent resolution of the lawsuit on Thursday between
) did not have an impact on its shares in the trading session
last Friday. The suit was related to Barclays' failure to uphold
an indemnity during the financial crisis in 2008. The settlement
was filed in a US District Court in Manhattan but neither party
disclosed the terms of the deal.
In May 2013, Citigroup filed a complaint with the U.S. District
Court, New York, claiming that indemnity payments of roughly $141
million were due to be paid by Barclays. The compensation was
related to losses incurred by Citigroup on foreign exchange
settlement services provided to a unit of Lehman Brothers
instantly after its bankruptcy.
The case was associated with the Continuous Linked Settlement
(CLS) system. The CLS is a settlement services provider for
member companies in the foreign exchange market. These member
companies settle transactions through CLS, which helps in
mitigating settlement risks related to their trades.
Citigroup alleged that it wanted to discontinue settling trades
for Lehman's brokerage unit after the latter filed for
bankruptcy, as it was sustaining huge losses. However, Barclays,
which was then about to buy Lehman's U.S. broker-dealer business,
urged Citigroup to continue settling trades and guaranteed to
indemnify for losses incurred between Sep 17 and 19, 2008.
However, Barclays failed to compensate for losses amounting to
roughly $580 million. Consequently, Citigroup lowered the sum and
sued Barclays for $90.8 million and additional interest and legal
We believe that the settlement of the lawsuit bodes well for both
companies. Citigroup will be able to recover the losses related
to Lehman, which were supposed to be secured by the Barclays
collateral. Barclays, on the other hand, has been plagued in
recent times by litigations and tougher regulations in the U.S.
and Europe. Hence, the resolution of the aforementioned case will
relieve it to some extent.
At present, Citigroup has a Zacks Rank #5 (Strong Sell) while
Barclays carries a Zacks Rank #3 (Hold). Some better-ranked
banking stocks include
The PNC Financial Services Group, Inc.
), both of which have a Zacks Rank #2 (Buy).
BB&T CORP (BBT): Free Stock Analysis
BARCLAY PLC-ADR (BCS): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
PNC FINL SVC CP (PNC): Free Stock Analysis
To read this article on Zacks.com click here.