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World's top banker resigns over £3bn loss
Last updated at 22:52pm on 04.11.07Citigroup Inc. says Charles Prince has resigned as chairman and chief executive officer, and that former US Treasury Secretary Robert Rubin will become the chairman of the United States' biggest banking company.
The move comes after the bank held crisis meetings in a bid to stave off a financial disaster that could spread across the globe.
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Bank chairman and chief executive Chuck Prince has stood down
New York-based Citigroup, which employs more than 300,000 people worldwide and 12,000 in Britain, is facing a £3.3billion loss and a 57 per cent slump in profits.
Prince, is thought to have stood down at an emergency board meeting on Sunday.
Analysts hope the move will relieve the gloom within the company – and also prevent panic from spreading to the rest of the banking world.
Justin Urquhart Stewart of UK-based Seven Investment Management said the news from Citigroup could hit banking shares across the sector.
"Investors in the financial-services sector will need to be braced," he said.
"No one believes the banks any more about the scale of the problem and if the world's biggest bank comes out with more write-offs, people will be nervous other banks will follow suit.
"This is not just a boardroom coup, this has repercussions across all banks."
While the US banks have borne the brunt of the credit-crunch fallout – with Prince's departure coming just days after rival Merrill Lynch ousted its boss Stan O'Neal – UK banks have suffered greatly.
The biggest loser has been Northern Rock where, ironically, Citigroup is one of its advisers.
Unable to borrow from other banks and faced with savers withdrawing their money – in the first run on a British bank for a century – Northern went cap in hand to the Bank of England, which has so far lent it more than £20billion.
Banking shares here have collapsed in recent months and last week the rumour mill was suggesting problems at Barclays, whose share price is at its lowest level for more than two years.
Citigroup's main UK office is a skyscraper in London's Canary Wharf, and it has hundreds of thousands of British customers and more than 1.1billion customers around the world.
It has been hit by huge losses in its high-risk sub-prime mortgage business. Last week, the group's shares fell 11 per cent.
The £90billion group's share price is now below the level it was when Prince joined in 2003 and financial analysts had warned he was at risk of being axed.
"The buck has to stop with the boss," said one banking insider.
Prince earned more than £27million during four years running the group.
Authorities have reacted to try to help sustain confidence in the banks and also to ease the burden on borrowers. The US authorities cut interest rates last week and this week the Bank of England will meet to set rates here.
Although it is under pressure to help mortgage payers and other borrowers and cut the rate, most economists expect the cost of borrowing to stay on hold at 5.75 per cent.
