KEY POINTS:
Citigroup shareholders who feared Charles Prince could never fill Wall St legend Sanford Weill's shoes appear to have been proved right.
Prince's tumultuous four-year tenure at the helm of the largest US bank ended this week, when he resigned as chairman and chief executive.
The 57-year-old native Californian became Wall St's second chief executive to lose his job after this northern summer's credit market collapse, joining Merrill Lynch's Stanley O'Neal.
Citigroup's problems deepened yesterday as it was unable to assure investors a potential US$11 billion ($14.6 billion) write-down for subprime mortgages won't grow, and its nearly pristine credit rating was downgraded.
The largest US bank also reduced previously reported third-quarter profit because of worsening credit market problems, which it expects to reduce future cash flow. Its shares fell more than 5 per cent.
"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 honourable course for me to take as chief executive officer. This is what I advised the board."
Like Merrill, which had a US$8.4 billion write-down that analysts expect to grow, Citigroup ventured far into risky debt and leveraged lending.
Prince took much heat for his July 9 comments that the bank was "still dancing" in private equity, just as it appeared to many that the music was about to stop.
"They should have fired him a while back," said Jim Huguet, co-chief executive of Great Companies in Tampa, Florida. "He was brought in to fix their legal problems because he's a lawyer, but they need someone who is capable of really building the business, and I don't think that's Prince's forte."
Prince worked for Weill for 17 years, becoming his most trusted adviser as a small Baltimore firm called Commercial Credit morphed through dozens of acquisitions into the largest US bank.
Known as a workaholic, Prince in 1997 even delayed a life-saving kidney cancer operation until Travelers Group, then his employer, completed its acquisition of investment bank Salomon Brothers, according to the Weill biography Tearing Down the Walls by Monica Langley.
Prince graduated from the University of Southern California law school in 1975 and took a job at US Steel Corp. In 1979, he joined Commercial Credit, where Weill became chairman in 1986.
After he took over Citigroup, Prince spent much of his first two years focused on cleaning up a slew of ethical and regulatory problems at the bank. Citigroup had already paid US$400 million in the Wall St stock research scandal.
He wrestled with Citigroup's role in the collapses of Enron and WorldCom, a scandal over its Japanese private bank, and a rogue bond trade that upended European markets.
Citigroup paid out more than US$5 billion to resolve investigations. In 2005, the Federal Reserve barred it from big acquisitions for a year, but lifted the ban in April 2006 after Prince's campaign to clean up internal ethics bore fruit.
Prince turned his focus towards improving performance, and bolstering business outside the United States.
But unlike Bank of America and JPMorgan, which spent more than US$140 billion on major acquisitions, Prince focused on growing organically and through smaller acquisitions.
And while Prince sold slower-growing asset management and insurance units, he struggled to inject life into Citigroup's largest business, US consumer banking.
Upper management turned into a revolving door, leaving Citigroup with few if any internal replacements ready to replace Prince immediately.
Investors grew fed up. Saudi Prince Alwaleed bin Talal, Citigroup's largest individual investor, last year urged "draconian" measures to cut costs. While Prince made progress this year, and set 17,000 job cuts, the US$6.5 billion write-down negated these efforts. Shareholders made Citigroup pay. Since Prince took over, Citigroup shares are down 17.1 per cent, compared with gains of 10 per cent in the Philadelphia KBW Bank Index and 51.6 per cent in the Standard & Poor's 500 index. Bank of America's market value has surpassed Citigroup's.
Now Prince has himself paid - with his job.
Charles O. Prince III
* Charles Prince graduated in law in 1975 and took his first job as a lawyer for US Steel Corp.
* Joined Commercial Credit Co in 1979.
* That bank went through a series of mergers and acquisitions before merging with Citicorp in 1998.
* Prince rose to be chairman and chief executive of Citi's markets and banking division by 2002.
* In October 2003, Sanford Weill was replaced by Prince as chief executive.
* As deputy to Weill he even postponed a kidney-cancer operation until the takeover of Salomon Brothers had been completed.
Citibank
* Citibank founded in 1812.
* Group has 200 million customer accounts.
* More than 300,000 staff worldwide.
- Reuters
