Citigroup chief quits; Rubin tapped

NEW YORK — Citigroup installed former Treasury Secretary Robert Rubin as its chairman Sunday after embattled Chairman and Chief Executive Charles Prince resigned in the wake of a $6.5 billion write-down for the third quarter.

After an emergency board meeting Sunday, the nation's biggest banking company, citing sharp declines in the value of subprime-related securities in the past month, estimated it would take additional write-downs of $8 billion to $11 billion.

Win Bischoff, 66, who heads Citigroup's European operations, will be interim CEO 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 a phone interview Sunday night, Rubin, 69, reiterated his lack of interest in taking the job himself, saying he will remain chairman until a successor is named.

Rubin, a former co-chairman of Goldman Sachs, served as Treasury secretary under President Clinton and joined the Citigroup board in 1999.

Rubin said Citigroup would also establish a new unit dedicated to managing securities related to subprime mortgages.

The management change comes after the company a week ago 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.

Prince executed what was called an umbrella model of corporate organization, with several separate lines of business. His four-year tenure, during which he worked to expand overseas operations and consumer banking, had 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 had 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.

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 worsening write-downs and credit costs prompted Chief Financial Officer Gary Crittenden to indicate the outlook going forward wasn't as upbeat as Prince had predicted.

Citigroup wasn't alone in its third-quarter turmoil.

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.

But Citigroup's stumbles were particularly grievous, given the bank's size, history and CEO, who had 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."

Fixing Citigroup will take more than just cleaning up bad debt.

The umbrella model Weill created and Prince touted looked like a giant mess compared to its conglomerate counterpart JPMorgan Chase — now led by Weill's former protégé, Jamie Dimon.

JPMorgan's write-downs were smaller, and strength in asset management, security services, card services and commercial-banking units made up for weakness in other areas.

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.

Material from The Associated Press was included in this report.