OOOOH only few $$ billions going to money heaven - Citi to take additional writedown as CEO Prince resigns
November 04. 2007 8:12PM
Sir Win Bischoff named interim CEO; former Treasury Secretary Robert Rubin named chairman;
Citi will write down $8 billion to $11 billion.
Bloomberg News (AP) - Citigroup Inc. said Sunday 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 Treasury Secretary Robert Rubin.
In an announcement following an emergency meeting of Citi's board, the nation's 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.
Mr. Prince's resignation, which was secured at an emergency meeting of the Citi board Sunday, was expected after the nation's largest banking 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 $8 billion to $11 billion in writedowns. It has already said it was writing down $6.5 billion in assets.
Mr. Prince, 57, became chief executive of Citigroup in October 2003. Many shareholders have criticized him openly for much of his tenure, as Citigroup's stock lagged its peers. Shares closed Friday at $37.73, about 20% below where they were when Mr. Prince became CEO.
Mr. Prince's position looked especially shaky after the company on Oct. 1 estimated that third-quarter profit would decline about 60 percent to some $2.2 billion after seeing nearly $6 billion in credit costs and write-downs of overly leveraged corporate debt and souring home mortgages. At that time, Mr. 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 $6 billion, and Chief Financial Officer Gary Crittenden indicated the outlook going forward wasn't as upbeat as Mr. Prince had predicted.
Citigroup wasn't alone in its third-quarter turmoil. When borrowers with poor credit stopped paying their mortgages, many banks not only had to take losses on those subprime mortgages, they also saw instruments in their portfolios backed by mortgages plummet in value.
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