Citigroup Inc chairman and chief executive Charles Prince, beset by the company's billions of dollars in losses from investing in bad debt, has retired and is being replaced as chairman by former US Treasury Secretary Robert Rubin, the company said.
In an announcement on Sunday following an emergency meeting of Citi's board, the US' largest banking company also said Sir Win Bischoff, chairman of Citi Europe and a member of the Citi management and operating committees, would serve as interim CEO. Rubin, a former co-chairman of Goldman, Sachs & Co, has served as the chair of Citi's executive committee.
Prince's resignation, which was secured at an emergency meeting of the Citi board on Sunday, was expected after the company revealed it had to write down billions of dollars in bad debt. He joined former Merrill Lynch & Co CEO Stan O'Neal, who resigned from the investment bank last month, as the highest-profile casualties of the debt crisis that has cost billions at other financial institutions as well.
In a separate statement, Citi said it would take an additional US$8 billion to US$11 billion in writedowns. It has already said it was writing down US$6.5 billion in assets.
Prince, 57, became chief executive of Citigroup in October 2003. Many shareholders criticized him openly for much of his tenure, as Citigroup's stock lagged its peers while Prince executed what was called an umbrella model of corporate organization, with several separate lines of business. Shares closed on Friday at US$37.73, about 20 percent below where they were when Prince became CEO.
Prince's position looked especially shaky after the company on Oct. 1 estimated that third-quarter profit would decline about 60 percent to some US$2.2 billion after seeing nearly US$6 billion in credit costs and write-downs of overly leveraged corporate debt and souring home mortgages. At that time, Prince said the bank's earnings would return to normal in the fourth quarter.
But when Citigroup released its third-quarter results two weeks later, the write-downs and credit costs exceeded US$6 billion, and chief financial officer Gary Crittenden indicated the outlook going forward wasn't as upbeat as Prince had predicted.
Citigroup was not alone in its third-quarter turmoil. But its stumbles were particularly grievous, given the bank's size, history and CEO, who had been telling shareholders for years to give his strategy a chance.
Even last month Prince said in a call to analysts: ``I think any fair-minded person would say that strategic plan is working.''
The umbrella model that Sanford Weill created and Prince touted looked like a giant mess compared to its conglomerate counterpart JPMorgan Chase & Co -- now led by Weill's former protege, Jamie Dimon. JPMorgan's writedowns were smaller, and strength in asset management, security services, card services and commercial banking units made up for weakness in other areas.
Having cut costs and built up cash reserves in previous quarters, the bank was better prepared for a tough lending climate.
Meanwhile, Citigroup's expenses outweighed revenues, it botched its fixed income trading operations, and its cash-to-debt ratio dipped.
The anger toward Prince was so intense that during a conference call last month, Deutsche Bank analyst Mike Mayo told Prince that investors wanted a significant change in management.
His supporters, though, argue that he was dealt a tough hand when Weill gave him the reins, and that matching the hefty profit gains Citigroup saw in the 1990s would be difficult for any CEO.
Morgan Chase & Co and Bank of America Corp, is trying to create a fund to buy up distressed securities in the tight credit markets, a move some experts say smacks of desperation. Citigroup is the only major US bank to manage "structured investment vehicles" (SIVs), and may end up having to take losses on them because demand for the assets that fund them has dropped.
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