Citigroup CEO Resigns; Former Treasury Chief Named Chairman
Monday, November 5, 2007
NEW YORK, Nov. 4 -- Citigroup has installed former Treasury secretary Robert Rubin as chairman after the widely anticipated resignation of Charles Prince, the embattled chairman and chief executive who faced mounting criticism in the wake of a $6.5 billion write-down for the third quarter.
After an emergency board meeting Sunday, Citigroup, citing significant declines in the value of subprime-related securities in the past month, estimated that it would take additional write-downs of $8 billion to $11 billion.
Win Bischoff, who heads Citigroup's European operations, will serve as interim chief executive while a special committee, consisting of Rubin and three other board members, looks for a permanent replacement.
"We intend to complete our search for a new CEO as expeditiously as possible, reviewing qualified CEO candidates from outside as well as within our organization," Rubin said in statement. In a phone interview Sunday night, Rubin reiterated his lack of interest in taking the job himself. He will remain chairman just until a successor is named. Rubin was a co-chairman of Goldman Sachs, served as Treasury secretary under President Bill Clinton and joined the Citigroup board in 1999.
Rubin said Citigroup would establish a new unit dedicated to managing securities related to subprime mortgages.
The management change comes after Citigroup last month reported a 57 percent decline in profit and $6.5 billion in write-downs on assets on its books. Prince, 57, a corporate lawyer by training, succeeded Sanford Weill at the top of the nation's largest bank in October 2003. His four-year tenure, during which he worked to expand overseas operations and consumer banking, has been a tumultuous one. Despite efforts to streamline the sprawling financial behemoth, Citigroup has trailed its peers.
Citigroup shares, which closed Friday at $37.73, have fallen by a third this year. They are down 17 percent since Prince became chief executive.
"It is my judgment that given the size of the recent losses in our mortgage-backed securities business, the only honorable course for me to take as Chief Executive Officer is to step down," Prince said in a statement.
Pressure has been mounting for Prince's ouster, with analysts questioning the direction of the business to the firm's ability to pay dividends.
Sunday night, executives at Citigroup moved to dispel such speculation, saying there were no plans to stop dividend payments or alter Citigroup's course.
With his resignation Sunday, Prince became the second chief executive of a major Wall Street firm to lose his job since subprime mortgage losses roiled financial markets and struck at the bottom lines of numerous banks.
Last Tuesday, E. Stanley O'Neal, chairman and chief executive of Merrill Lynch, was forced to resign after acknowledging $7.9 billion in write-downs on mortgage-related securities for the quarter, about $3 billion more than the firm announced just three weeks earlier.