Citigroup's Prince Resigns, Rubin Chairman

4 Nov 7:46am
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Citigroup's (C) Charles Prince officially resigned Sunday saying "Given the size of the recent losses in our mortgage-backed securities business, the only honorable course for me to take as chief executive is to step down." Former Treasury Secretary Robert Rubin has been named Chairman.

More announcements are expected Monday regarding the exact leadership structure until a new CEO is found. Citigroup is also announced it will report billions of dollars in additional write-downs on mortgage-related securities this week. Citigroup said "These declines in the fair value of Citi’s sub-prime related direct exposures followed a series of rating agency downgrades of sub-prime U.S. mortgage related assets and other market developments, which occurred after the end of the third quarter. The impact on Citi’s financial results for the fourth quarter from changes in the fair value of these exposures will depend on future market developments and could differ materially from the range above."

This crushes the roughly $2.2 billion in mortgage-related write-downs in Q3 reported just last month. They also said "Citi expects that market conditions will continue to evolve, and that the fair value of Citi’s positions will frequently change. Given these anticipated fluctuations, Citi does not intend to update the information provided in this release until it announces its fourth quarter 2007 earnings in January 2008. Investors also should not expect Citi to provide information about the results of future quarters in advance of scheduled quarterly earnings announcement dates."

Regarding the rumored dividend cut, Citigroup said Sunday that it "has no plans to reduce its current dividend level" and that "capital ratios will return within the range of targeted levels by the end of the second quarter of 2008," despite "significant uncertainty" in the markets.

Now the fun begins. Shares at their current level yield 5.6% and rose as much as 5.8% in trading in Tokyo this morning (in Tokyo). Down 30% for the year and 9% last week look very enticing. We already own shares and they make up about 9% of the portfolio weighted by value and will be looking to add more soon. Citi has a worldwide reach no other bank can meet and under the right leadership will make investors very happy again, especially with shares coming from the depths they are now.


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About

ToddSullivan

A Massachusetts based value investor, I look for companies whose current valuation is at a discount to their true value. When I purchase a stock, my typical holding period is several years. I consider buying a stock purchasing a piece of a business. I am confident once I make a decision to buy that eventually the market as a whole will recognize the true value of the business and value it accordingly. It may take 1 month, 6 months or a year, but if I buy it at enough of a discount to its true value my results will be (and have been) superior to the market as a whole. Of all the disparate investing disciplines, value investing has stood the test of time. The great investors of have all been value investors. Warren Buffett, Ben Graham, Bill Ruane (Sequoia Fund), Bill Miller and Wally Weitz, all have consistently outperformed the market for decades by using various forms of value investing. Currently I am a contributing writer to Seeking Alpha, Vinvesting.com, The Stock Masters and Value Investing News. Posts have been reprinted in The Wall St. Journal, Yahoo Finance, Google Alerts, Google Finance, TheStreet.com. 24/7 Wall St. and Topix.net.