This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.
You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7078251.stm
The article has changed 19 times. There is an RSS feed of changes available.
| Version 15 | Version 16 |
|---|---|
| Citigroup chief executive resigns | Citigroup chief executive resigns |
| (about 1 hour later) | |
| Charles Prince, the chairman and chief executive of one of the world's biggest banks, Citigroup, has resigned. | Charles Prince, the chairman and chief executive of one of the world's biggest banks, Citigroup, has resigned. |
| He will be replaced as chairman by former US Treasury Secretary Robert Rubin, while Sir Win Bischoff will serve as interim chief executive. | |
| Investor calls for Mr Prince to go have increased since the bank reported a 57% drop in quarterly profits, after losses in the sub-prime mortgage market. | Investor calls for Mr Prince to go have increased since the bank reported a 57% drop in quarterly profits, after losses in the sub-prime mortgage market. |
| He is the second head of a leading US bank to step down within a week. | He is the second head of a leading US bank to step down within a week. |
| The head of Merrill Lynch, Stan O'Neal, resigned after reporting heavy losses. | The head of Merrill Lynch, Stan O'Neal, resigned after reporting heavy losses. |
| His exit will cause a frisson among senior bankers all over the world, because few of their organisations will escape unscathed from the problems in credit markets Robert Peston, BBC Business Editor Read Robert Peston's blog Q&A: What went wrong? Profile: Charles Prince Darling reassures markets | His exit will cause a frisson among senior bankers all over the world, because few of their organisations will escape unscathed from the problems in credit markets Robert Peston, BBC Business Editor Read Robert Peston's blog Q&A: What went wrong? Profile: Charles Prince Darling reassures markets |
| After Mr Prince stepped down, Citigroup revealed that it was facing losses of between $8bn and $11bn in previously undisclosed losses due to a decrease in the value of its $55bn portfolio of sub-prime loans. | After Mr Prince stepped down, Citigroup revealed that it was facing losses of between $8bn and $11bn in previously undisclosed losses due to a decrease in the value of its $55bn portfolio of sub-prime loans. |
| And it warned that there could be further losses to come in its trading positions in sub-prime mortgages if its hedging operations did not succeed. | And it warned that there could be further losses to come in its trading positions in sub-prime mortgages if its hedging operations did not succeed. |
| Citigroup shares fell 4.6% in early trading. | |
| 'Structure is broken' | 'Structure is broken' |
| "Given the size of the recent losses in our mortgage- backed securities business, the only honourable course for me to take as chief executive officer is to step down," Mr Prince said on Sunday. | "Given the size of the recent losses in our mortgage- backed securities business, the only honourable course for me to take as chief executive officer is to step down," Mr Prince said on Sunday. |
| But some analysts say that the sub-prime losses were just the last straw. | But some analysts say that the sub-prime losses were just the last straw. |
| CITIGROUP FACTS Citibank founded in 1812Group has 200 million customer accountsOwns Diners Club and Schroder Salomon Smith BarneyMore than 300,000 staff worldwideOwns $55bn of sub-prime debt Check Citigroup share price | CITIGROUP FACTS Citibank founded in 1812Group has 200 million customer accountsOwns Diners Club and Schroder Salomon Smith BarneyMore than 300,000 staff worldwideOwns $55bn of sub-prime debt Check Citigroup share price |
| "When you look at the trillions of dollars in assets that Citi has and you're talking about potential exposure of maybe $15bn: it's bad but it's not the end of the world," said Bill Smith from Smith Asset Management in New York. | "When you look at the trillions of dollars in assets that Citi has and you're talking about potential exposure of maybe $15bn: it's bad but it's not the end of the world," said Bill Smith from Smith Asset Management in New York. |
| "The actual structure of Citigroup is broken - it's too big, it's too bloated and we think it should be broken up into three of four pieces," he added. | "The actual structure of Citigroup is broken - it's too big, it's too bloated and we think it should be broken up into three of four pieces," he added. |
| The board of Citigroup paid tribute to Mr Prince, with Alain Belda saying: "We thank Chuck for his unwavering commitment to Citi, its employees and its shareholders." | The board of Citigroup paid tribute to Mr Prince, with Alain Belda saying: "We thank Chuck for his unwavering commitment to Citi, its employees and its shareholders." |
| Earnings revisions | Earnings revisions |
| Mr Prince's resignation follows the sudden increase in the projected losses suffered by the group. | Mr Prince's resignation follows the sudden increase in the projected losses suffered by the group. |
| HAVE YOUR SAY Everyone is going to feel this credit crunch to some extent Turned Worm Send us your comments | HAVE YOUR SAY Everyone is going to feel this credit crunch to some extent Turned Worm Send us your comments |
| Earlier, Citigroup had reported that net income (profits) dropped to $2.38bn from $5.51bn a year earlier, in the three months to the end of September. | Earlier, Citigroup had reported that net income (profits) dropped to $2.38bn from $5.51bn a year earlier, in the three months to the end of September. |
| On Monday morning, Citigroup shares rose 5.8% in value on their Japanese stock market debut, hours after Mr Prince's departure was confirmed. | On Monday morning, Citigroup shares rose 5.8% in value on their Japanese stock market debut, hours after Mr Prince's departure was confirmed. |
| From a tentative starting price of 4,330 yen, based on Friday's New York close, they traded at 4,580 yen. | From a tentative starting price of 4,330 yen, based on Friday's New York close, they traded at 4,580 yen. |
| Sub-prime woes | Sub-prime woes |
| Citigroup has been one of the most active participants in the sub-prime mortgage-backed securities market, buying billions of dollars worth of mortgages and then selling them on to international investors. | Citigroup has been one of the most active participants in the sub-prime mortgage-backed securities market, buying billions of dollars worth of mortgages and then selling them on to international investors. |
| SUB-PRIME CRISIS EXPLAINED Sub-prime loans are offered to those with inferior credit records or unpredictable earnings. The debt has been repackaged and sold around the world. Rising interest rates trigger record defaults, casting doubts on the value of the debt. Special series on how bad US home loans are affecting us allToday: Spread of sub-prime Friday: US economy stalls Two million set to lose homes Readers' experiences | SUB-PRIME CRISIS EXPLAINED Sub-prime loans are offered to those with inferior credit records or unpredictable earnings. The debt has been repackaged and sold around the world. Rising interest rates trigger record defaults, casting doubts on the value of the debt. Special series on how bad US home loans are affecting us allToday: Spread of sub-prime Friday: US economy stalls Two million set to lose homes Readers' experiences |
| But since August the credit market for these types of securities has frozen up, leaving many big banks holding unsold mortgage securities whose value has taken a tumble. | But since August the credit market for these types of securities has frozen up, leaving many big banks holding unsold mortgage securities whose value has taken a tumble. |
| The lack of a market has made it difficult for companies to evaluate the size of their potential losses. | The lack of a market has made it difficult for companies to evaluate the size of their potential losses. |
| In its statement, Citi said that its securitized mortgage-backed debt obligations "are not subject to valuation based on observable market transactions." | In its statement, Citi said that its securitized mortgage-backed debt obligations "are not subject to valuation based on observable market transactions." |
| Instead, it has had to estimate the fair value of those securities, based on assumptions about future house prices and cash flows from the underlying mortgages. | Instead, it has had to estimate the fair value of those securities, based on assumptions about future house prices and cash flows from the underlying mortgages. |
| Overall, there are over $1 trillion worth of sub-prime mortgage-backed securities outstanding, and the Federal Reserve has estimated that the financial sector as a whole could lose at least $100bn. | Overall, there are over $1 trillion worth of sub-prime mortgage-backed securities outstanding, and the Federal Reserve has estimated that the financial sector as a whole could lose at least $100bn. |