Citi - off the wire & into the fire

NEW YORK (AP) -- Citigroup Inc. Chief Executive Charles Prince is expected to step down soon from the helm of the nation's largest bank, which many shareholders and analysts say needs new leadership to extract itself from a mess of worrisome debt.
If he does resign, Prince, 57, would become the second CEO at a major U.S. financial institution to leave during this year's credit crisis, following Merrill Lynch's Stan O'Neal.

Citigroup's board is meeting Sunday, and Prince will offer his resignation then, The Wall Street Journal first reported Friday, citing unnamed people familiar with the situation. The New York Times also reported Prince will resign and said the company might name former Treasury Secretary Robert Rubin, who now chairs the bank's executive committee, as interim chairman.

Citigroup spokesman Michael Hanretta would not comment on the reports.

Prince became chief executive of Citigroup in October 2003. Many shareholders have blasted him openly for much of his tenure, as Citigroup's stock lagged its peers. 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, of course. When borrowers with poor credit stopped paying their mortgages, 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 has 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."

Analysts believe Citigroup has more losses ahead of it. Deutsche Bank analyst Mike Mayo -- who told Prince during a conference call after Citigroup's results were released that investors wanted a significant change in management -- estimated Thursday that Citigroup would have to write down another $4 billion.

In early October, the bank combined its investment banking and alternative investments businesses into one unit led by Vikram Pandit, who had led Citigroup's alternative investments unit. In that shuffle, Tom Maheras, co-CEO of the investment banking unit, left.

But at the time, Rubin and Saudi Arabian Prince Alwaleed bin Talal -- Citigroup's biggest individual shareholder and once a critic of Prince -- expressed their support for the bank's embattled CEO.

When asked if Alwaleed still supported Prince, his representatives on Saturday said he did not wish to comment on any media speculation.

By Madlen Read, AP Business Writer