Nov. 5 (Bloomberg) -- Citigroup Inc., the largest U.S. bank, rose on its first day of trading in Tokyo as Chief Executive Officer Charles Prince resigned to take responsibility for losses stemming from U.S. mortgage defaults.

The bank's shares closed 220 yen, or 5.1 percent, higher at 4,550 yen ($40) after rising as much as 4,580 yen. About 10,000 shares were traded compared with 138.7 million in New York on Nov. 2 when the stock slumped to a four-year low.

The listing comes as Prince resigned following a 57 percent decline in third-quarter profit on writedowns related to defaults on U.S. mortgages and a 32 percent slide in the share price in 2007. The U.S. bank listed in Tokyo after buying Nikko Cordial Corp., Japan's third-largest brokerage, this year.

``It's hard to be optimistic on the business outlook despite the strength we're seeing in the stock today,'' said Naoki Fujiwara, who helps oversee $3.2 billion at Shinkin Asset Management Co. in Tokyo. ``The direct impact of subprime problems seems to be fading but they have yet to deal with ripple effects from the turmoil.''

Sir Win Bischoff is interim chief executive until Prince's replacement is found and former Treasury Secretary Robert E. Rubin has been named chairman, New York-based Citigroup said in a statement today. The bank canceled a scheduled press conference in Tokyo today.

Nikko Acquisition

Citigroup bought 61 percent of Nikko Cordial for $7.7 billion in April, and increased the stake to 68 percent in June. It said last month it's buying the rest and will delist Nikko shares after expected completion of the purchase in January.

Nikko gives Citigroup about 110 branches in the world's second-largest economy, narrowing a gap with Mitsubishi UFJ Financial Group Inc., Japan's biggest publicly traded bank. Citigroup incorporated its bank unit locally earlier this year, making it a Japanese bank for regulatory purposes.

The takeover also enables Citigroup to expand investment banking in Japan through its joint venture with Nikko, as well as offer wealth management services to its customers. The U.S. bank has encountered problems in Japan in the past though and faces new competition.

Prince visited Tokyo in October 2004 to apologize after Citigroup had to close its private-banking business because of regulatory breaches. HSBC Holdings Plc said in September this year it aims to open as many as 35 branches in Japan and offer wealth management services to capture a share of the $13.5 trillion of financial assets held by Japanese individuals.

Champagne Toast

Douglas Peterson, chief executive officer of Citigroup Japan Holdings Ltd., rang the bell at the Tokyo exchange before toasting the bank's listing with a glass of champagne. The U.S. group first listed in Japan in 1973 before withdrawing in 1998 when Citicorp merged with Travelers Group Inc. to form Citigroup.

``Citigroup has a record of delisting,'' said Yasuo Kanzaki, 76, a senior adviser to Nikko Citigroup Ltd., at the Tokyo debut ceremony. ``The bank has committed to Japan and I hope it doesn't forget its word.''

The number of overseas companies listed on the Tokyo bourse fell to 25 from a peak of about 125 in 1990, based on data provided by the exchange. U.S. firms Merrill Lynch & Co. and JPMorgan Chase & Co. also have Tokyo listings although daily trading volumes are small. Merrill's shares traded only three times in October in Tokyo.

``It's the best opportunity to buy Citigroup right now as it's in the worst situation,'' said Takao Sasaki, an associate professor at Heisei International University in Tokyo, who bought shares this morning. ``I'm not sure if it can boost its retail business here after the regulatory penalty and I'd prefer HSBC as it has a new image.''

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net.

Last Updated: November 5, 2007 01:47 EST