Citigroup (NYSE: C), the largest US bank with 200 million accounts, has annouced that its chief executive and chairman, Charles Prince, has resigned following poor quarterly results and pressure from shareholders. Robern Rubin will replace him as chairman, and Sir Win Bischoff as interim chief executive.

The news comes after the bank reported a 57% fall in quarterly profits, with loss estimations of between $8-$11 billion, primarily a result of a continuing fall in value of its $55bn sub-prime mortgage portfolio, part of its Securities and Banking (S&B) business. Shares dropped 4.85% today to $35.90, the lowest value recorded since June 2003.

Prince commented that "we have made strong progress in our strategy for building for the future, evidenced in the momentum we have achieved in most of our businesses. Nevertheless, it is my judgement that given the size of recent losses in our mortgage-backed securities business, the only honorable course for me to take as Chief Executive Officer is to step down."

The effect of the collapsing sub-prime market in the US is further amplified by the non-existent demand for CDOs from international banks. Debt is usually repackaged as 'Collateralized debt obligations' and sold to other banks. However, the level of demand is currently low to non-existent, and so Citigroup has had to retain securities that are falling in value, and is faced with the difficulty of assigning a value to these packages, when market forces are no longer able to set the price.

The UK chancellor of the exchequer, Alistair Darling, has tried to provide reassurance following concerns that the US situation could have a knock-on effect around the world, commenting that the prospect for growth in the US, UK and wider world is 'good', and that growth will continue despite a decline in the rate of growth. Darling also made demands for more transparency in the market, but suggested that UK banks nevertheless had strong balance sheets.