Citigroup To Write Off Another $8-11 Billion; Rubin Named Chair

Citigroup disclosed Sunday it will write off another $8-11 billion in subprime losses, a slide that could erase half the company's 2007 profit. It also announced that it has appointed Sir Win Bischoff, chairman of Citi's European operations, as interim CEO to replace outgoing Charles Prince. Senior adviser Robert Rubin, a former vice chairman of Goldman Sachs and Bill Clinton's Treasury Secretary, has been named chairman. The new losses are additional to $2.2 billion in trading losses and mortgage-related write-downs that Citi announced on October 15, the day it reported a 57% drop in Q3 earnings from the previous year. Citigroup, with $2.35 trillion under management, is one of the largest banks in the world, but Charles Prince was unable to fuse its myriad parts into a cohesive unit. "Chuck Prince took over with all the tools," said Peter Sorrentino of Huntington Asset Management. "Citigroup hasn't delivered." Unlike JPMorgan Chase, which compensated for heavy Q3 credit losses with gains in other areas, Citigroup performed poorly across the board -- in part, the WSJ asserts, because of Citigroup's fractured corporate structure. The appointment of Rubin is receiving mixed reviews. "He's slipped more punches than Muhammad Ali," said Robert Stovall, global strategist at Wood Asset Management. "He's got a pretty good reputation worldwide and has a knack for handling crises." Some look askance at his former role as "consigliere" to Prince and other Citigroup executives. "Even if he wasn't directly involved with the mess, he also hasn't criticized anything publicly, so he's guilty by association," said Manhattan College finance professor Charles Geisst.

Sources: Press release on management, Press release on subprime exposure, Wall Street Journal I, II, Bloomberg I, II
Commentary: Citigroup to Have Emergency Board Meeting - WSJ • Citigroup's Weakness Drags Down Financials; Tech Continues Strong • Question of Solvency at Citigroup
Stocks to watch: C. Competitors: BAC, DB, JPM. ETFs: DHS, FDL, IYG
Earnings call transcript: Citigroup Q3 2007

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