NEW YORK, Nov 5 (Reuters) Charles Prince resigned on Sunday as chairman and chief executive of Citigroup Inc, and the bank said it may suffer an billion write-down for subprime losses.
Robert Rubin, the former US Treasury Secretary, was named chairman, while Sir Win Bischoff, who runs Citigroup's European operations, was named acting chief executive.
Citigroup said it expects to write down billion to billion, after taxes, for its roughly billion of exposure to U.S.
subprime mortgages. The write-down equals billion to billion before taxes, and may change, Citigroup said.
The write-down is on top of the .5 billion that Citigroup wrote off three weeks ago for subprime mortgages, loan losses and other debt.
Citigroup now expects to restore normal capital levels by the end of June 2008. It had previously expected an early 2008 return. The bank said it nevertheless has no plans to cut its 54 cents per share quarterly dividend.
Prince's departure ends a tumultuous four-year tenure marked by heavy management turnover, questions over strategy, and mounting losses from bad loans and mortgages.
It would also come five days after Merrill Lynch&Co ousted its own chief executive, Stanley O'Neal, following an .4 billion write-down.
''Given the size of the recent losses in our mortgage-backed securities business, the only honorable course for me to take as chief executive is to step down,'' Prince said in a statement. ''This is what I advised the board.
Citigroup's problems have also spurred calls for the bank to be broken up because it is too unwieldy.
''I just don't think (Prince) was the right person to run Citigroup,'' said Jim Huguet, co-chief executive of Great Companies LLC in Tampa, Florida, a Citigroup shareholder. ''They need someone who is capable of really building the business, and I don't think that's Prince's forte.'' In a joint interview, Rubin and Bischoff expressed support for Prince's overall strategy.
''The board is extremely supportive of Chuck's strategy,'' Rubin said. ''This is absolutely the right track.'' Rubin, 69, joined Citigroup in 1999 after more than four years as Treasury secretary, and chairs the bank's executive committee. He has long been a close adviser to Prince, focused on strategy rather than day-to-day operations. Before joining the Clinton administration, Rubin had spent 26 years at Goldman Sachs&Co, becoming co-chairman of the investment bank.
Bischoff, 66, assumed his present position in May 2000 after the acquisition of Schroders Plc's investment banking business by Citigroup unit Salomon Smith Barney. He had been chairman of Schroders since May 1995.
THE DANCING ENDS Prince, 57, has struggled to improve results at Citigroup, especially in U.S. consumer banking, its biggest business.
He has also been under enormous pressure to cut expenses, including from the New York-based bank's largest individual investor, Saudi Prince Alwaleed bin Talal.
While he appeared to have some success early this year, the write-down all but thwarted that goal for 2007.
Prince didn't help his cause in July when he said Citigroup was ''still dancing'' to a private equity buyout boom that was about to flame out, suggesting to investors that he didn't appreciate the risks in leveraged lending.
Citigroup has exposure to mortgages through tens of billions of dollars of off-balance-sheet structured investment vehicles, and is in talks with rivals to set up a conduit to buy assets from troubled SIVs.
The US Securities and Exchange Commission is examining whether Citigroup accounted properly for its own SIVs, the Wall Street Journal said. Citigroup declined to confirm the existence of a probe.
Investors have pushed Citigroup shares down 32 percent this year. The stock is also down 17 percent since Prince in October 2003 took over as the hand-picked successor of Sanford ''Sandy'' Weill, his mentor since joining a Baltimore firm called Commercial Credit Co in 1986.
It's not clear who might become permanent chief executive. A special board committee consisting of Rubin, Alain Belda, Richard Parsons and Franklin Thomas will seek a replacement from internal and external candidates.
Upper management has undergone rapid turnover, leaving the bank without an obvious immediate successor.
Analysts have said John Thain, who runs NYSE Euronext, might be a candidate. Internal candidates may include Vikram Pandit, who oversees investment banking and alternative investments, and Chief Financial Officer Gary Crittenden. Analysts have said neither may be ready yet.
Bear Stearns Cos and Swiss bank UBS AG also shook up top management in 2007 after credit losses.
REVOLVING LEADERSHIP DOOR The first half of Prince's tenure was marked by a cleanup of ethical and regulatory problems. Citigroup paid more than billion to settle litigation, including over its work for Enron Corp and WorldCom Inc and the issuance of inflated stock research by analysts like the now-discredited Jack Grubman.
Prince bowed deeply at a October 2004 Tokyo news conference in apology for a scandal that caused the closure of Citigroup's private bank in Japan. The US Federal Reserve barred the bank from acquisitions for a year while it cleaned up its house.
When Prince refocused on Citigroup's operations, he emphasized organic growth, especially outside the United States, saying Citigroup was too big to pursue the ''transformational'' acquisitions that marked Weill's tenure.
He sold asset management and insurance units, and added branches and lending offices for the stagnating US consumer banking unit.
Acquisitions, apart from a pending purchase of Japanese brokerage Nikko Cordial Corp, were small.
But revenue didn't grow fast enough, while expenses grew too much. Prince in April set 17,000 job cuts companywide.
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