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NEW YORK - When Charles Prince replaced Sanford "Sandy" Weill at the helm of Citigroup, he was given the unenviable task of replacing a legend. Shareholders feared he could never fill Weill's shoes. They may soon be proven right.
The end of a tumultuous four-year reign at the largest US bank by assets appears at hand for the 57-year-old native Californian, expected to resign at an emergency board meeting today, according to the Wall Street Journal.
Prince would become the second big-name chief executive on Wall Street to lose his job after this summer's credit market collapse, which led at Citigroup to a US$6.5 billion write-down and a 57 per cent decline in quarterly profit.
Merrill Lynch on Tuesday ousted its chief Stanley O'Neal, after an US$8.4 billion write-down.
Like Merrill, Citigroup ventured far into risky forms of debt and leveraged lending. Prince took much heat for 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.
"It has been a long and tiring time for Citigroup stock investors," said Thomas Russo, a longtime Citigroup investor who helps invest US$3 billion at Gardner, Russo & Gardner in Lancaster, Pennsylvania. "Prince had told investors this would be the year of no excuses. It unfolded into a year of lots of excuses."
REPAIR JOB
Trained as a lawyer, Prince worked for Weill for 17 years, becoming his most trusted adviser as a small Baltimore firm called Commercial Credit Co. morphed through dozens of acquisitions into the largest US bank.
Known as a workaholic, in 1997 Prince 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 Street stock research scandal.
He wrestled with issues including Citigroup's role in the collapses of Enron Corp. and WorldCom Inc., 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 toward improving performance, and bolstering business outside the United States.
But unlike Bank of America and JPMorgan Chase & Co, which spent more than US$140 billion on major acquisitions, Prince focused on growing organically and through smaller acquisitions. He said Citigroup was too big for the "transformational" purchases Weill was known for.
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.
TIME FOR A CHANGE
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 earlier 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. Bank of America's market value has surpassed Citigroup's.
Now Prince appears to be paying, with his job.
"He was brought in to do a specific job: to fix the regulatory issues that seemed to come up every day," said Lee Norton, an analyst at JS Asset Management LLC in West Conshohocken, Pennsylvania, which owns Citigroup shares. "He got them through. Now it's time to bring in someone new."
- REUTERS
