Citigroup Seeks CEO, Prepares for Losses

Citigroup Chairman and Chief Executive Charles Prince speaks during an unveiling ceremony for the group's new logo at Citibank Korea head office in Seoul in this March 30, 2007, file photo. Citigroup Inc.'s board plans an emergency meeting on Sunday, and Prince is expected to offer to resign, according to the Wall Street Journal. (AP Photo/Ahn Young-joon, file) (Ahn Young-joon - Associated Press)

NEW YORK -- Citigroup Inc. shareholders may have finally gotten what they wanted _ the resignation of Chairman and Chief Executive Charles Prince _ but Wall Street's worries are far from over.

At an emergency meeting of the Citi board Sunday, the nation's largest bank announced Prince's widely expected departure, but also estimated it would take additional losses of $8 billion to $11 billion. In the third quarter, it already took a hit of $6.5 billion in asset mark-downs and other credit-related losses.

Meanwhile, the company remains entrenched in a mire of off-the-books investment vehicles funded by risky debt. Citigroup may need to take the fall for them if they fail.

And Citigroup's not alone in its debt problems. 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. No one knows how much longer home prices will keep slumping, and whether problems related to the housing market will start affecting other types of consumer debt.

Also to be seen is how much longer the credit markets will stay tight, and if the currently strong portions of the economy will be hampered by banks' inability to make loans.

"It's the lending practices," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn. "How much is that going to be impaired?"

Citi said former U.S. Treasury Secretary Robert E. Rubin, once co-chairman of Goldman, Sachs & Co., will be chairing the beleaguered bank. Sir Win Bischoff, chairman of Citi Europe and a member of the Citi management and operating committees, will serve as interim CEO.

Prince 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.

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 that of 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.

Rubin, 69, after 26 years at Goldman Sachs, became President Bill Clinton's chief economic adviser in 1993 before leading the Treasury Department. His experience steering the U.S. economy during the Mexican and Asian financial crises could come in handy as Citigroup attempts to navigate the tight credit markets.

Bischoff was the chairman of the British investment bank Schroders PLC, then joined Salomon Smith Barney Inc., a subsidiary of Citi, when it acquired Schroders. He began his current position in May 2000.

"There's no change of strategy that we see, actually, going forward," Bischoff said, noting that the company still plans to focus on international expansion, at least until a new CEO is chosen.

It was not known whether Bischoff was in the running to replace Prince as CEO. Before Sunday's meeting, many ideas for Prince's replacement were floated by industry watchers; one name that has come up often is John Thain, who was once president of Goldman Sachs and is now CEO of NYSE Euronext.

But it may take more than a figurehead change to restore shareholders' confidence in Citigroup, considering how much bad debt it has on its hands and its hard-to-shed image of a rule-flouting old boys club.

In 2004, Citigroup had to close its Japan Private Bank amid allegations of improper activities. And in January, former head of global wealth management Todd Thomson resigned, reportedly having been forced out for extravagant spending and dealings with CNBC anchor Maria Bartiromo.

Citigroup did a minor reshuffing in early October, combining its investment banking and alternative investments businesses into one unit led by Vikram Pandit, who had led Citigroup's alternative investments unit. Tom Maheras, co-CEO of the investment banking unit, left.