Nov. 4 (Bloomberg) -- Citigroup Inc. said Chief Executive Officer Charles Prince is stepping down after the largest U.S. bank warned of as much as $11 billion of additional writedowns on subprime mortgages and related securities, on top of more than $6 billion of charges reported for the third quarter.

Robert Rubin, who was U.S. Treasury Secretary under President Bill Clinton and had served as the chairman of Citigroup's executive committee since 1999, will take over Prince's role as chairman of the board, the New York-based bank said today in a statement. Sir Win Bischoff, a London-based executive who joined Citigroup in 2000 when it bought Schroders Plc, is stepping in as interim CEO.

Citigroup's stock fell 11 percent last week on speculation that deterioration in subprime investments might deplete capital and force a cut in the company's dividend. Citigroup said in the statement today that it has no plan to cut the dividend.

Prince ``felt that, given the losses that are in the press release that you received, the honorable course was for him to step down,'' Rubin said in an interview. The search for a permanent CEO is ``beginning immediately, and we will work as expeditiously as possible.''

Credit Turmoil

Other members of the search committee include lead director Alain Belda and board members Richard Parsons and Franklin Thomas. Belda is chairman of Alcoa Inc., Parsons is CEO of Time Warner Inc. and Franklin A. Thomas is the former chairman of the Ford Foundation.

Citigroup, which has 327,000 employees, offices in more than 100 countries and $2.2 trillion in assets, has foundered since Prince succeeded his mentor, Sanford Weill, in October 2003. The credit turmoil that began in the subprime mortgage market sent Citigroup's quarterly profit to its lowest level in three years and the stock has plunged 32 percent in 2007, twice as much as Bank of America Corp. and JPMorgan Chase & Co.

The 57-year-old Prince is leaving as analysts question whether Citigroup will have to cut its dividend because of a shortage of capital and the U.S. Securities and Exchange Commission scrutinizes the company's accounting for structured investment vehicles that hold mortgage-backed securities. The company has said its SIV accounting complies with ``all applicable rules and regulations.''

Remaining Subprime

``While significant uncertainty continues to prevail in financial markets,'' Citigroup expects that capital ratios ``will return within the range of targeted levels by the end of the second quarter of 2008,'' while maintaining the current dividend, the company said.

Shortly after the announcement of Prince's resignation, Citigroup shares climbed as much as 5.8 percent on their first day of trading on Nov. 5 in Tokyo.

The bank's shares climbed 250 yen to 4,580 yen ($40) before declining to 4,550 yen at the close of morning trade. About 7,000 shares changed hands compared with 138.7 million in New York on Nov. 2 when the stock slumped to a four-year low.

The performance of remaining subprime investments, which totaled $55 billion as of Sept. 30, is partly dependent on ``the underlying performance of the economy,'' Chief Financial Officer Gary Crittenden said in an interview.

Analysts at CIBC World Markets and Morgan Stanley told clients last week to get rid of Citigroup shares. CIBC's Meredith Whitney said Citigroup may have to sell assets because it needs to raise $30 billion of capital. The combination of $25 billion of acquisitions in the past 19 months and the lowest cushion for losses ``in decades'' increases the risk of owning the stock, she said. Deutsche Bank AG analyst Michael Mayo said last month that Prince should be replaced.

Fallout

Prince joins a growing list of executives who have lost their jobs in fallout from losses in the fixed-income markets. He departs less than a week after Merrill Lynch & Co., the world's biggest brokerage, ousted Stan O'Neal after the New York-based firm disclosed $8.4 billion of writedowns.

UBS AG, the biggest Swiss bank, dismissed CEO Peter Wuffli in July and said earlier this month that finance chief Clive Standish and investment-banking head Huw Jenkins were stepping down. Others ousted include Bear Stearns Cos. President Warren Spector and Citigroup trading head Thomas Maheras.

The world's largest financial institutions have disclosed more than $30 billion of writedowns as the worst housing slump in 16 years has led to record U.S. foreclosures and losses in the subprime market. Analysts have said Citigroup may have to take more writedowns in the fourth quarter to reflect the decreasing value of mortgage-related securities.

The Company's Direction

Just four months ago, Prince said he ``felt good'' about Citigroup's direction. He said on Oct. 15 when the company reported the 57 percent drop in third-quarter earnings that momentum ``continues very strong'' in most of the company's businesses. Citigroup's return on equity, a gauge of how effectively the company reinvests earnings, fell to 7.4 percent from 18.9 percent a year earlier, making it the second-lowest among Wall Street firms after Bear Stearns's 5.3 percent.

Since Prince became CEO in 2003, Citigroup shares have declined about 3 percent, compared with the 14 percent advance by Bank of America, the second-biggest U.S. bank by assets. Bank of America is larger by market value at $200 billion, topping Citigroup's $188 billion.

Prince became one of Weill's top deputies in 1986. An attorney with a law degree from the University of Southern California, Prince spent most of his career as Weill's top lawyer, advising on the acquisitions that made Citigroup the nation's biggest financial-services company.

Prince's Career

Prince then spent his first few years as CEO cleaning up regulatory missteps by Citigroup. In the U.S., Prince spent $4.7 billion to settle suits alleging Citigroup helped defraud investors of Enron Corp. and WorldCom Inc. The company has denied wrongdoing.

In Japan, he bowed in apology before regulators after authorities shut Citigroup's private bank for failing to prevent customers from laundering money. In Europe, he settled investigations into suspicious bond trades his employees had dubbed ``Dr. Evil.'' On orders from the U.S. Federal Reserve, Prince has tightened internal controls in an effort to keep the bank out of future trouble.

Prince also has dismantled parts of Citigroup that Weill took three decades to build. The company sold Travelers Life & Annuity Co. to MetLife Inc. for $11.5 billion in 2005. Prince even folded Weill's trademark red umbrella by selling the 137- year-old emblem to St. Paul Travelers Cos., which had merged with Travelers Property in 2004, for an undisclosed price. The St. Paul, Minnesota-based insurance company now calls itself Travelers Cos.

``What burns inside of me is the notion of the best, the most important, the most influential, the most comprehensive international bank,'' Prince said in an interview conducted this year. ``We have got to race ahead.''

Acquisitions

In the U.S., where revenue rose 4 percent in 2006, Prince added 1,000 bank branches in the past year and hired traders and investment bankers overseas, where growth has been faster.

After limiting acquisitions, Prince has made a string of purchases this year. Citigroup bought the Old Lane Partners LP hedge fund in April for about $800 million. That same month, Citigroup purchased 61 percent of Tokyo-based brokerage Nikko Cordial Corp. for $7.7 billion in an effort to stage a comeback in Japan. Last month, Citigroup agreed to buy the rest of Nikko Cordial for about $4.6 billion. Prince has also made purchases in China, Turkey, the U.K. and the U.S.

Under pressure last year from Saudi billionaire Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, Prince appointed Robert Druskin, CEO of global corporate and investment banking, as chief operating officer and ordered him to slash costs.

Druskin, 60, eventually drafted two plans, one to cull jobs and another to streamline computer systems. Together, those efforts will trim $4.6 billion from Citigroup's $50 billion-plus annual budget by 2009, according to the company.

To contact the reporters on this story: Yalman Onaran in New York at yonaran@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net.

Last Updated: November 4, 2007 22:52 EST