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he report also said the Securities and Exchange
Commission is reviewing Citi's accounting for a type of funds known as
structured investment vehicles (SIVs). The bank may report further
losses on Monday, reflecting more declines in the value of some
subprime-related securities since the end of the third quarter, the
newspaper said, citing unidentified people familiar with the situation.
Citigroup (C:Citigroup, Inc Last: 37.73-0.78-2.03%4:01pm 11/02/2007 Delayed quote data Sponsored by:
![]() C 37.73,
-0.78,
-2.0%)
spokeswoman Christina Pretto wouldn't comment on whether the board
would meet Sunday or if Prince plans to end his four-year tenure at the
helm.
But Pretto denied
irregularities connected with the SIV funds, telling MarketWatch that
"Citi is confident that its accounting for SIVs is proper and in
thorough accordance with all applicable rules and regulations."
Rubin, Thain among possible replacements
Possible replacements for Prince include Robert Rubin, chairman of
Citi's executive committee and a former Treasury Secretary and Goldman
Sachs (GS:Goldman Sachs Group, Inc Last: 229.60-10.61-4.42%4:00pm 11/02/2007 Delayed quote data Sponsored by:
![]() GS 229.60,
-10.61,
-4.4%)
partner. However, the Journal report said Rubin has resisted such calls and could become the bank's full chairman instead.
Another candidate is John Thain, chief executive of NYSE Euronext, the
world's largest operator of stock exchanges, the newspaper reported.
Thain, who served as president of Goldman, has forged ties with Rubin
and chose Citi to advise the NYSE (NYX:nyse euronext com Last: 90.46-0.45-0.49%4:00pm 11/02/2007Delayed quote data Sponsored by:
![]() NYX 90.46,
-0.45,
-0.5%)
on its acquisition of Euronext last year, the report said.
Prince became CEO of Citi in 2003 when the bank was struggling with
regulatory problems. As the company's main in-house lawyer, he seemed a
suitable choice and helped clear up legal tangles.
His predecessor Sandy
Weill had built the company into a huge financial-services supermarket
through a series of big deals. The combination of insurance giant
Travelers with Citicorp in 1998 crowned the acquisition-fueled drive
towards providing all financial services under one roof.
Weill's move
subsequently lost currency among some investors, who worried that
Citigroup has become too unwieldy to manage effectively.
By 2005, Citigroup agreed to sell its Travelers life and annuity business to MetLife (MET:metlife inc com Last: 63.99-0.80-1.23%4:05pm 11/02/2007Delayed quote data Sponsored by:
![]() MET 63.99,
-0.80,
-1.2%)
, another insurer.
Citigroup has recently come under criticism for lackluster revenue
growth and high expenses. The bank's shares were up roughly 20% since
Prince took over in October 2003. But that lagged rivals such as Bank
of America (BAC:bank of america corporation com Last: 45.11-0.60-1.31%4:03pm 11/02/2007Delayed quote data Sponsored by:
![]() BAC 45.11,
-0.60,
-1.3%)
and J.P. Morgan Chase (JPM:JPMorgan Chase & Co Last: 43.15-1.17-2.64%4:01pm 11/02/2007 Delayed quote data Sponsored by:
![]() JPM 43.15,
-1.17,
-2.6%)
, which had gained more than 35% in the same period.
The subprime mortgage crisis that enveloped global credit markets this
summer exacerbated Citi's problems and weakened Prince's position
further. The bank has lost roughly a fifth of its market value in the
past month. In mid-October, the company reported a 57% drop in
third-quarter profit after billions of dollars in write-downs.
Its residential
mortgage lending business has been exposed directly to the impact of
rising delinquencies and foreclosures among the less creditworthy,
subprime borrowers.
The bank has also
provided interim financing for leveraged buyouts. When leveraged loan
markets dried up this summer, it was left holding so-called hung loans.
As of the end of August, Citi was the lead underwriter of leveraged
loans supporting five of the six largest pending LBOs, according to
Banc of America Securities research.
As the largest sponsor
of SIVs, Citigroup also has roughly $80 billion of potential exposure
to these funds. SIVs are off-balance sheet vehicles that borrow for
short periods of time in the commercial paper market and use that money
to invest in higher yielding longer-term assets, such as
mortgage-backed securities and other related products -- known
collectively as collateralized debt obligations.
SIVs, which had almost
$400 billion in assets at the end of June, have been hit hard by the
global credit crunch. Some have been forced to sell assets to repay
creditors because they've struggled to refinance themselves in the
commercial paper market.
The SEC is looking into
whether Citigroup accounted for its $80 billion SIV exposure
appropriately, according to the Journal report. 
Alistair Barr is a reporter for MarketWatch in San Francisco.
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