The Financial Times is reporting that Citibank has to write off more losses due to heavy subprime mortgage exposure.
The bank is taking another $8 billion to $11 billion hit to revenues because of “significant” declines in the $55 billion or so in U.S. subprime mortgage exposure it has in its securities business. That adds up to a profit cut of $5 billion to $7 billion.
As a result, Charles Prince decided to step down as Citibank CEO (though his compensation package is probably nothing to complain about).
In a statement Sunday night, Prince said “it is my judgment that given the size of the recent losses in our mortgage-backed securities business, the only honorable course for me to take as chief executive officer is to step down. This is what I advised the board.”
Just a few short months ago, Federal Reserve Chairman Ben Bernanke claimed that the mortgage mess is contained. $11B in losses due to bad subprime mortgages by a major bank hardly seems like a ‘contained’ problem.
At Drinking Is Believing, we’re not here to make predictions or give any advice, however it’s difficult to see how the Real Estate market will get better any time soon.
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