Citigroup's CEO expected to resign over the weekend

November 03, 2007|By New York Times News Service

NEW YORK -- Citigroup's embattled chairman and chief executive has told senior officials at the bank that he expected to leave after an emergency board meeting this weekend, a banking industry official with ties to Citigroup said last night.

Chairman Charles O. Prince III, 57, had indicated that he expected to leave during the meeting, the official said. Directors also are expected to discuss the possibility of another large write-off.

"The entire organization is in uproar and people have been looking for leadership," said one Citigroup executive familiar with the situation. "The organization is waiting for something."

"At some point, the company is worse off or better off without the guy," the official said. "That collective point has come and passed."

People close to the board said a search committee would be formed to find a successor.

Prince's departure would be a crushing blow to the legacy of Citigroup's founder and former chairman, Sanford I. Weill, and will lead to renewed calls to break up the company.

Not only was he Weill's hand-picked successor, Prince was his chief lawyer who helped engineer a series of big deals that transformed Citigroup into a sprawling banking giant.

Among them was the $3.7 billion deal in 2005 in which Baltimore's Legg Mason Inc. agreed to trade its brokerage unit for Citigroup's money management business. Citigroup now employs about 6,000 in Maryland.

Reports of Prince's plans to resign were first reported on The Wall Street Journal online.

Prince would become the second chief executive to lose his job after the problems with subprime mortgages.

E. Stanley O'Neal, Merrill Lynch & Co.'s chairman and chief executive, was forced to retire after the brokerage reported an $8.4 billion write-down and a $2.3 billion loss. O'Neal also angered directors with an unauthorized merger approach to a rival bank, Wachovia Corp.

Citigroup, the country's largest bank by market value, in early October reported a $5.9 billion write-down and a 6 percent drop in earnings from the third quarter of 2006. The earnings report and the size of the write-down renewed speculation that Prince would have trouble remaining atop the bank.

The problems compounded Thursday, when Meredith A. Whitney, an analyst at CIBC World Markets, downgraded Citigroup stock and said the bank would need to cut its dividend or sell assets to stave off what she said was a $30 billion capital shortfall. The report sent Citigroup's shares down $3.39; they fell another 78 cents yesterday. Shares are down almost 18 percent for the year, much of that decline coming in the last four weeks.

Since taking over in October 2003, Prince has touted an ambitious strategy that called for expansion overseas and internal growth. This spring, he announced a restructuring effort to curtail expenses, months after the bank's biggest shareholder, Prince Alaweed bin Talal of Saudi Arabia declared that "draconian measures" were necessary."

But despite a few signs of progress earlier this year, investors grew frustrated.

Prince's abrupt departure comes as a surprise. In recent weeks two board members, former Treasury Secretary Robert E. Rubin and Time Warner CEO Richard D. Parsons, had said firmly that they expected Prince to stay on for the coming years.

To a large extent, Prince was bowing to the inevitable. Despite having been the chosen successor to Weill, Prince's austere, lawyerly manner, albeit leavened with a sharp sense of humor, did not go over well as Citi continued to flounder.

In the end, Prince's legitimacy was always a result of his close ties to Weill. As his chief lawyer, Prince was by Weill's side from the early days in Baltimore in the mid-1980s. That is where the two men and a circle of other Weill associates started to build the conglomerate that is today's Citigroup by turning around an obscure financial company called Commercial Credit Corp.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.