Citibank boss quits as an additional $11 billion in sub-prime losses loom

Citibank chairman and CEO Charles Prince announced his resignation on Sunday, 4 November, after the bank said it may have to write off up to $11 billion in sub-prime mortgage losses, over and above a $6.5 billion write-down last quarter.

Former US treasury secretary Robert Rubin, who chaired Citigroup's executive committee, was named chairman in his place, while Citigroup's European operations chief Sir Win Bischoff was named acting chief executive. In a joint interview, Rubin and Bischoff expressed support for Prince's overall strategy.

Citigroup expects to write down another $5 billion to $7 billion after taxes ($8 billion to $11 billion before taxes) for its $55 billion of exposure to US sub-prime mortgages. The write-down may rise if markets worsen, the bank said. Citigroup's previous $6.5 billion write-down related to sub-prime mortgages, loan losses and other debt.

The company had $2.35 trillion in assets as of 30 September, making it the largest bank in the US. It has about 300,000 employees and operates in 100 countries. In the US alone, it has 1,015 Citibank branches, 2,467 CitiFinancial branches and 803 Smith Barney brokerage offices.

During the housing boom, Wall Street made enormous profits by turning mortgages - many of them sub-prime home loans made to borrowers with poor credit - into bonds and a series of exotic securities. The banks sold the securities to big investors, but also held on to large numbers of them, which have lost much of their value owing to the downturn in the housing market.

"The size of these charges makes stepping down the only honourable course for me to take as chief executive officer. This is what I advised the board," Prince said in a memo to employees. The size of the write-down came as a shock to most analysts, and indicates the speed at which sub-prime crisis is unravelling.