(C) Citigroup’s Hacked Customers Lose $2.7 Million

Around 3,400 customers of Citigroup Inc. (C) whose credit card information was hacked suffered $2.7 million in losses, according to a report in the Wall Street Journal. This latest information came to light when government officials were informed by Citi about the data leak.

Earlier Citi had revealed the extent of the recent security breach it faced after hackers got access to hundreds of thousands of its credit card customers’ information in North America. Management affirmed that around 360,083 North America Citi-branded credit cards were hacked and only accounts issued in the U.S. were impacted.

Citi came to know about this unauthorized access during a routine check up. Customers’ account information such as name, account number and contact information, including email addresses were leaked. However, at that time Citi had suggested that chances of fraud could be less as more critical data remained unscathed. Such data include customers’ social security number, date of birth, card expiration date and card security code (CVV).

However, it seems that the extent of client information that was hacked was further used to procure financial information through illicit ways, which resulted in this loss.

Citi made contacts with the affected customers and took initiatives to avoid any such event again in the future. Around 217,657 accounts were reissued credit cards along with a notification letter by Citi. Other customers were not re-issued credit cards because either their accounts were closed or they already received new credit cards through other card replacement practices.

Besides Citi, Google Inc. (GOOG), Lockheed Martin Corp. (LMT), and Sony Corp. (SNE) have also reported cyber attacks in the recent past. This also questions the level of protection these companies are providing to their customers.

Our Take

Incidents like cyber attacks and the consequent loss incurred by customer dents Citi’s reputation. It also may result in the company losing customers to its competitors who could now take advantage of this faulty system.

In a competitive market post financial crisis, Wall Street biggies are not only making aggressive efforts but are also keeping no stone unturned to retain their brand names and customer base. Hence, such an incident is uncalled for Citi.

In addition, the company must also bear upfront costs for providing alternative services to the affected clients like replacing their credit cards.

Citi currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the stock.

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