Citigroup chief to resign this weekend

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The Independent Online

Chuck Prince, the chief executive of Citigroup, is set to quit the US banking giant as the credit crunch claims its biggest victim yet.

Mr Prince is said to be ready to resign at a board meeting tomorrow. The news will send shock waves around the financial world as top-level casualties of the market meltdown mount.

Mr Prince's departure, reported in the Wall Street Journal, will come less than a week after the ousting of Stan O'Neal from rival Wall Street giant Merrill Lynch.

Mr Prince, 57, has been chief executive of Citi for four years. A string of misdemeanors in the bank's sprawling empire and runaway costs had undermined confidence even before the credit crunch.

In July, Mr Prince said Citi was "still dancing" while the debt-boom music played, but within weeks the markets had frozen and Citi was forced to write down $6bn of credit losses.

Citi's shares slumped for the second day yesterday after a banking analyst said the company might have to cut its dividend to restore its capital position.

The news came after a day when fears about the financial sector sent stocks markets down on both sides of the Atlantic for a second day running, pushing Barclays shares to their lowest for more than two years.

Panic about the effects of the credit crunch spread from the US to Britain, with banks leading share-price falls on both sides of the Atlantic. Barclays was the FTSE 100's biggest faller, plunging 6 per cent on rumours it had been forced to go to the Bank of England for emergency funding.

The bank declined to comment on the rumour, but the Bank of England's daily report showed no bank had used its overnight funding facility the day before. Barclays global head of commercial banking, Frits Seegers, bought about £700,000 of shares, which would be surprising if the bank had liquidity problems.

John Paul Crutchley, an analyst at Merrill Lynch, called the rumour "a Friday bear-raid in a skittish market". He said in meetings with investors that Barclays' management was repeating reassuring guidance given in October. But the bank's shares fell to 537.5p, their lowest since June 2005. The FTSE 100 ended down 55.5 at 6,530.6.

Barclays is a target for fears about the credit crunch because its investment bank, Barclays Capital, is a major player in the once-booming credit markets that went into meltdown in Aug-ust. The bank will put out a trading statement later this month, but until then investors are left to fear the worst about its exposure to the credit crunch.

Panmure Gordon said yesterday there was "a clear path" from the credit market turmoil to big trading losses for UK banks with exposure to US mortgages and global markets. Concern also hit Royal Bank of Scotland, whose shares fell 4.7 per cent.

New Star Asset Management said Bank of England figures showed banks giving massive support to hedge funds, off-balance sheet vehicles and other financial intermediaries hit by the crunch in the third quarter. Simon Ward, New Star's chief economist, said the third-quarter total of £41bn lent to these sectors was a record.

Fears about the UK banking sector were also fuelled by talk that Mervyn King, the Governor of the Bank of England, had resigned. People familiar with Mr King dismissed the rumour, and a report said the football-loving central banker had turned down the chance to be the next chairman of the Football Association.

Banking sector fears have been stoked by news from the US. Merrill Lynch shares fell by as much as 12 per cent yesterday, on reports that it could face billions more in losses.

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