CitiGroup CEO may quit at urgent meeting; Rubin asked to take over

Section:

Citi's Prince to Offer to Resign

By Damian Paletta, Robin Sidel, and David Enrich
The Wall Street Journal
Friday, November 2, 2007

Citigroup Inc. Chief Executive Charles Prince will offer to resign on Sunday, according to people familiar with the matter.

The development comes as board members are expected to gather for an emergency meeting this weekend, people familiar with the matter said. The meeting comes amid worries of further writedowns and pressure on Mr. Prince.

Robert Rubin, the former Treasury secretary who is the chairman of Citigroup's executive committee, is being considered as a possible interim replacement, but he has balked at taking on the responsibility, those people said. A Citigroup spokeswoman declined to comment.

Citigroup directors in recent months have publicly pledged their allegiance to Mr. Prince, and he received a key vote of confidence in early October from Prince Alwaleed bin Talal, the bank's biggest individual shareholder.

But the board's sentiment may have shifted in the wake of Citigroup's dismal third-quarter earnings report last month. Any change of heart may also have been spurred along this week after the board of Merrill Lynch & Co. ousted its embattled CEO, Stanley O'Neal.

Citigroup has lost more than a fifth of its market value since Oct. 12, the Friday before it reported that its third quarter earnings had slumped 57% under the weight of mortgage defaults and this summer's credit scare. The bank's shares ended trading down 2% Friday at $37.73.

In reporting its third-quarter earnings, Citigroup warned that it endured a surge in late payments on consumer mortgages in September, costing the bank $3 billion in higher losses and reserves against future bad loans and hurting the value of loans Citigroup hopes to sell to investors. Chief Financial Officer Gary Crittenden said the trend is likely to continue.

Citigroup also booked $1.56 billion in pretax losses tied to loans and subprime mortgages that were to be repackaged and sold to investors.

Equally important, the bank said its capital levels had dwindled to below the company's internal target ratios. Executives said the company would stop repurchasing its own shares until it rebuilt its capital, a process it hopes to complete by early next year. Some analysts and other experts think Citigroup will have to take more drastic actions, such as selling off assets or slicing its dividend payouts.

The third quarter losses came as Mr. Prince was already under heavy pressure from investors to get revenue up, cut costs and demonstrate that Citigroup's financial supermarket model can pay off. Investors have been frustrated by Citigroup's stagnant stock price.

Among the Citigroup executives who analysts and investors view as possible successors to Mr. Prince are Ajay Banga, the head of Citi's vast international consumer business, and Manuel Medina-Mora, who runs Citi's Latin America and Mexico business.

Vikram Pandit, who was recently promoted to head the bank's institutional clients group, which includes its investment bank and alternative investments arm, is considered a viable future candidate, but he has been at Citi for less than a year, probably rendering him unsuitable to take the helm immediately.

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