Citigroup CEO may be next casualty

Citigroup Inc. Chief Executive Charles O. Prince is expected to resign this weekend, the Wall Street Journal said, as the widening sub-prime mortgage crisis deals a final blow to a reign long under attack.

The largest U.S. bank is expected to hold an emergency board meeting Sunday, at which Prince would step down, the newspaper said Friday, citing people familiar with the situation.

Citigroup spokesman Michael Hanretta declined to comment. Prince, a Lynwood native, did not return a call to his office.

Speculation that he would leave the bank swirled for weeks after a $6.5-billion third-quarter write-down fed fears of more losses to come, dragging Citigroup’s shares to a 4 1/2 -year low.

“Prince had told investors this would be the year of no excuses. It unfolded into a year of lots of excuses,” said Thomas Russo, a partner at Gardner, Russo & Gardner.

Citigroup stock is down 32% this year and fell 78 cents to $37.73 in regular trading Friday. Shares rose to $39.01 in after-hours trading as reports surfaced of Prince’s impending exit.

Prince’s departure would be the second of a top Wall Street executive in this week. On Tuesday, Merrill Lynch & Co. ousted Stan O’Neal from the chief executive post after an $8.4-billion write-down.

Prince, a lawyer, is widely credited with having addressed Citigroup’s many legal and regulatory problems after he replaced Sanford “Sandy” Weill in October 2003. But he struggled to boost revenue faster than costs, raising worries about whether Citigroup has sufficient capital to grow and boost profitability.

It was not immediately clear who might replace Prince. Analysts have said the bank has few, if any, candidates ready to step in now after a series of high-level management departures. Robert Rubin, the former Goldman Sachs & Co. chief and U.S. Treasury secretary who is chairman of Citigroup’s executive committee, is being considered as an interim replacement but is reluctant to take over, the Journal said.

“He may not want the job, but if you are a Citigroup stockholder, you would wish he would take over,” said James Armstrong, president of Henry H. Armstrong Associates.

Prince does not have an employment contract. It was not immediately clear how much money he would depart with. He has close to 744,000 restricted shares worth about $28 million and owns more than $60 million of Citigroup stock directly, according to filings with the Securities and Exchange Commission.

O’Neal’s exit package was $161.5 million.

Prince tried to bolster Citigroup by buying a hedge fund run by Vikram Pandit, a former Morgan Stanley head of institutional securities, and by hiring American Express Co. Chief Financial Officer Gary Crittenden.

In the latest of a series of management shake-ups, Pandit was promoted last month to run the investment bank and alternative investments as trading chief Thomas Maheras left.

New York-based Citigroup said Oct. 15 that third-quarter profit slid 57% as losses mounted in areas including sub-prime mortgages and corporate loans to junk-rated companies.

Those results included $6.5 billion of losses and write-downs in sub-prime mortgage bonds and other assets that, combined with some $25 billion of acquisitions over the last year, left Citigroup’s capital below its targets.

A new chief executive may want to write down assets that have even the slightest whiff of trouble, said a portfolio manager who asked not to be named.

Citigroup also may be broken up. Prince has resisted this, but many portfolio managers believe Citigroup is unwieldy. The bank operates in more than 100 countries and has about 300,000 full-time employees.