Prince gives up his crown at Citigroup
NEW YORK (Reuters) - When Charles Prince replaced Sanford "Sandy" Weill at the helm of Citigroup Inc, he was given the unenviable task of replacing a legend. Shareholders feared he could never fill Weill's shoes.
It appears they were right.
Prince's tumultuous four-year tenure at the helm of the largest U.S. bank by assets ended Sunday, when he resigned as chairman and chief executive.
The 57-year-old native Californian became Wall Street's second chief executive to lose his job after this summer's credit market collapse, joining Merrill Lynch & Co's Stanley O'Neal.
Citigroup took a $6.5 billion write-down for subprime mortgage and other losses in the third quarter. On Sunday, it said it may write off another $8 billion to $11 billion for subprime mortgages, reducing net income this quarter by $5 billion to $7 billion. It also said those numbers could grow.
"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."
Like Merrill, which had an $8.4 billion write-down that analysts expect to grow, Citigroup ventured far into risky forms of 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 LLC 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 Co morphed through dozens of acquisitions into the largest U.S. 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 U.S. 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 $400 million in the Wall Street stock research scandal.
He wrestled with 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 $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 Corp and JPMorgan Chase & Co, which spent more than $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, U.S. 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 $6.5 billion write-down negated these efforts.
Shareholders made Citigroup pay. Since Prince took over, Citigroup shares are down 17.1 percent, compared with gains of 10 percent in the Philadelphia KBW Bank Index and 51.6 percent 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.
(Additional reporting by Dan Wilchins)