Citi CEO to Resign After Bank Threatened with Liquidity Issues
- 3.11.2007
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Citi CEO Charles Prince is about to loose his crown as head of Citi after the company saw about 20% of its market value wiped out amidst billions of dollars of write downs related to bets made on subprime mortgage-related debt. This is the second high-profile CEO to step down in a week - surely not surprising when billions of dollars were wiped clear off the books of these giants. You can’t just have that kind of money disappearing with out having heads roll.
Prince had it especially tough after reports arose that the company may need to cut its dividend to retain liquidity. That’s a really, really, big problem. It’s one thing for Countrywide to cite liquidity concerns as they are primarily a mortgage play; but Citi is a true global banking institution. You can’t even compare the Countrywide crisis to this one.
From Market Watch:
The stock dropped especially hard on Thursday, when analysts at CIBC sparked concern the bank may have to cut its dividend to preserve capital.
Prince has been under pressure to improve the bank’s performance, even before the credit crisis this summer.
Two weeks ago, Citi reported a 57% drop in third-quarter net profit two weeks ago due to recent write-downs for bad loans and other credit issues.
The company had revealed on Oct. 1 that it expected a year-over-year drop in net income in the range of 60%. But the write-downs and securities and trading losses ended up being $600 million more than estimated.
We’re really seeing the beginning of the capitulation of the industry as we know it. We’ve got that inane Barney Frank bill, CEO’s going down, state law suits ramping up, get ready - here comes the ‘fun’ part of the ride.
