Citigroup may write off $11b mortgage losses

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NEW YORK, Nov 5 (Reuters): Charles Prince resigned yesterday as chairman and chief executive of Citigroup Inc, as the bank said it may write off $11 billion of subprime mortgage losses, on top of a $6.5 billion write-down last quarter.
Robert Rubin, the former US Treasury Secretary who had chaired Citigroup's executive committee, was named chairman, while Sir Win Bischoff, who runs Citigroup's European operations, was named acting chief executive.
Citigroup said it expects to write down $5 billion to $7 billion after taxes-roughly three or four months of profit-for its $55 billion of exposure to US subprime mortgages.
The write-down equals $8 billion to $11 billion before taxes, and may rise if markets worsen, the largest US bank said. Citigroup's previous $6.5 billion write-down related to subprime mortgages, loan losses and other debt.
"I am responsible for the conduct of our businesses," Prince said in a memo to employees. "The size of these charges makes stepping down the only honorable course for me to take as chief executive officer. This is what I advised the board."
Citigroup, whose capital levels have been called into question, expects by June 2008 to return to normal capital levels, after previously expecting an early 2008 return. It has no plans to cut its 54 cents per share quarterly dividend. "It's shocking," said Ralph Cole, a portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon.
"The size of the write-down is most surprising, and the quickness with which subprime is deteriorating. Who's to say it isn't the last write- off (in the financial industry). I wonder what it means for everyone else."
Prince's departure came after he told investors on October 15, four days after an investment banking management shake-up, that the board thought Citigroup had a "good, sustainable strategic plan," and that further management changes weren't needed.
His exit ends a tumultuous four-year tenure marked by heavy turnover among senior executives, questions over strategy, and the mounting loan and credit losses. Problems have also spurred calls for the bank, which has $2.35 trillion of assets, to be broken up because it is too unwieldy.