Citigroup chief quits amid credit crisis

The head of the world's biggest bank, Citigroup, today became the latest corporate casualty of the global credit crunch.

Citi's chief executive, Charles "Chuck" Prince, said his resignation "was the only honourable course" after the bank racked up billions in losses and write-downs from exposure to high-risk mortgage debts.

The overnight announcement came as the banking giant warned of up to 11 billion US dollars (£5.3 billion) extra in write-downs on the so-called "sub-prime" mortgages.

This followed Citi's initial revelations of around 6.5 billion US dollars (£3.1 billion) in write-downs and losses three weeks ago, leading to a dramatic 57% collapse in third-quarter profits.

Citi is the latest in a string of major investment banks to come under intense pressure due to exposure to sub-prime losses.

This in turn has put banking shares under pressure in the UK amid investor concerns over potential losses.

Mr Prince, who has led the group for four years, stepped down after emergency meetings with the bank's board in New York yesterday.

He said: "It is my judgment that, 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."

The bank's current financial woes could have implications for the group's workforce of more than 300,000 staff worldwide. It employs around 12,000 people in the UK.

Sir Win Bischoff, Citi's European chairman, is to take over as interim chief executive.

Mr Prince's departure follows the exit of Merrill Lynch chief executive Stan O'Neal, who retired last week after the bank posted losses of 2.3 billion US dollars (£1.1 billion) - the biggest in its 93-year history.

Merrill was also hit by huge write-downs of 7.9 billion US dollars (£3.8 billion) on sub-prime exposure.

But the Citi boss's departure could be sweetened by a severance package and share options worth up to 87 million US dollars (£41.6 million), according to weekend reports.

A leading Wall Street analyst last week predicted that major investment banks could have to shoulder another 10 billion US dollars (£4.8 billion) in write-downs, but this estimate now looks conservative following Citi's latest announcement on sub-prime exposure.

The banks' problems stem from their exposure to complex bonds based on a range of investments including sub-prime mortgages, given to people with poor credit histories.

As mortgage defaults spiralled following steep rises in US interest rates, the bonds have collapsed in value amid vanishing market confidence.

Fellow banking giant UBS was another victim, after posting operating losses of 726 million Swiss francs (£302 million) in the three months to the end of September. Its exposure to crisis-hit US home loans led to losses and write-downs of 5.3 billion Swiss francs (£2.2 billion).