Citigroup’s Prince quits; Rubin takes spot

first_imgNEW YORK – 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. Rubin, a former co-chairman of Goldman, Sachs & Co., has served as the chairman of Citi’s executive committee. 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. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREStriving toward a more perfect me: Doug McIntyre 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 Friday at $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 $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, 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 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. But Citigroup’s 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 in October, 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 I. 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.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img

first_imgNEW YORK – 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. Rubin, a former co-chairman of Goldman, Sachs & Co., has served as the chairman of Citi’s executive committee. 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. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREStriving toward a more perfect me: Doug McIntyre 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 Friday at $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 $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, 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 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. But Citigroup’s 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 in October, 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 I. 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.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img

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