Citigroup’s chief executive to step down

Charles Prince, the chairman and chief executive of Citigroup, resigned yesterday as the bank said it may write off $11 billion of sub-prime mortgage losses, in addition to a $6.5 billion write-down last quarter.

Former US Treasury Secretary Robert Rubin Robert was named chairman, while Sir Win Bischoff will be acting chief executive.

The bank recently posted a 57% fall in quarterly profits after losses in the sub-prime mortgage market and since then Mr Prince has come under severe pressure from investors.

Mr Prince’s departure comes after the sudden increase in the projected losses suffered by the bank. Previously, Citgroup had reported that profits fell in the 3 months to the end of September to $2.38 billion from $5.51 billion compared with 12 months ago.

This morning, Citigroup shares increased 5.8% in value on their Japanese stock market debut, just a few hours after Mr Prince’s resignation was confirmed.

Charles Prince is the second head of a major US bank to step down after Merrill Lynch’s Chief Executive, Stan O’Neal, resigned after heavy losses.

Mr Prince said yesterday due to the extent of the recent losses in their mortgage-backed securities business, the only respectable thing for him was to step down.

However, Mr Prince was commended by the board of Citigroup and Alain Belda thanked him for his unwavering commitment to Citigroup.

However, many analysts say that the sub-prime losses were just the final straw. Bill Smith from Smith Asset Management in New York said when you look at the trillions of dollars in assets that Citigroup has and you’re talking about potential exposure of maybe $15 billion, it’s bad but it’s not the end of the world.

Mr Smith added that the structure of Citigroup is broken, it’s too big, it’s too bloated and we think it should be broken.

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