Citizens falls as Manafort indictment presents regulatory risk

A $3.4 MILLION LOAN from so-called
A $3.4 MILLION LOAN from so-called "Lender B" in the indictment matches one that Manafort took from Providence-based Citizens Bank, according to public records. / BLOOMBERG FILE PHOTO/KELVIN MA

NEW YORK – Citizens Financial Group Inc. dropped as much as 5.6 percent after it was tied to a loan described in U.S. Special Counsel Robert Mueller’s indictment of U.S. President Donald Trump’s former campaign chairman, Paul Manafort.

A $3.4 million loan from so-called “Lender B” in the indictment matches one that Manafort took from Providence-based Citizens Bank, according to public records. Investors are concerned that banking regulators could open an investigation into the firm’s bank-secrecy act and anti-money laundering compliance processes, said John Pancari, an analyst at Evercore ISI.

“The key investor concern is that such an investigation – if it exists – could develop into a formal regulatory consent order, which thereby could weigh on operational costs while also limiting growth,” Pancari said in a note to clients on Monday. Citizens spokesman Peter Lucht said the bank had no comment.

Citizens dropped 4.1 percent to close at $44.54 in New York, the worst performance in the KBW Bank Index and paring this year’s gain to 6.1 percent.

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Pancari said he spoke to the bank’s management and the lender reiterated confidence in its controls and procedures, while acknowledging a “rogue employee” does present a risk at any time. The firm acknowledged the investigation into Manafort but didn’t say whether the bank is a target of a separate probe, Pancari said.

Jenny Surane is a reporter for Bloomberg News.

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