Prince Goes Walkabout.....Brace Yourselves
--------------------------------------
Markets set for crisis as Prince poised to quit
MARTIN FLANAGAN
CITY EDITOR (mflanagan@scotsman.com)
FINANCIAL markets are set for a fresh rollercoaster ride today after the head of the world's biggest bank resigned last night.
Charles "Chuck" Prince, chairman and chief executive of Citigroup, quit following crisis meetings with the board in New York in the wake of billions of dollars in losses related to subprime lending.
He will be replaced as chairman by Robert E Rubin, the former US treasury secretary.
Sir Win Bischoff, chairman of Citi Europe, will serve as interim chief executive.
In a statment, Citigroup said Prince, 57, had retired.
After a rocky four-year reign, Prince is the second chief executive of one of the biggest American banks to be ousted because of mushrooming exposure to bad mortgage debts in the past week.
Stan O'Neal was forced out of Merrill Lynch following an $8 billion writedown on losses in the subprime lending sector.
It led to Merrill posting losses of $2.3bn - the biggest in its 93-year history.
Prince's departure is expected to send fresh shockwaves today through stock markets that are already reeling from the re-appearance of the subprime crisis.
One banking analyst said: "There could be loads of red on the screens. Citigroup was a big factor in the stock market nervousness late last week, and is bound to add to market jitters."
Eric Betts, equities strategist at Nomura Australia, said: "We have had a huge rally since the subprime-induced lows of August.
"So it's probably time for a bit of profit taking, consolidation and even a correction. A 5-10 per cent fall over the next few weeks wouldn't be a surprise."
In October, Citigroup revealed $6.5bn in writedowns and losses from investments based on high-risk US mortgages, which have collapsed in value. The bank's third-quarter profits plummeted 57 per cent to $2.4bn.
It has been reported that Prince might get a severance package and share options worth up to $87m. O'Neal got some $160m.
Citigroup employs more than 300,000 staff worldwide, of which 12,000 are in the UK.
It has a small operation in Edinburgh, employing about 150, managing various back-office functions for Aegon and Standard Life, among others.
The subprime crisis during the summer led to a freeze on interbank lending in the wholesale money markets because of fears about who was exposed to how much bad mortgage loans.
That in turn led to the funding crisis and the Bank of England bailout at the British mortgage bank Northern Rock. The latter provoked the first run on a major British bank in nearly 150 years.
As the subprime worries reappeared, markets were shaken globally. The Dow Jones index on Wall Street slumped 350 points, or 2 per cent, on Thursday, while in London the FTSE 100 fell 135 points, also 2 per cent. London dropped another 55 points on Friday, while Hong Kong slid 3 per cent and Tokyo 2 per cent.
This article: business.scotsman.com
Last updated: 05-Nov-07 00:05
====================================
reuters.com |
