NEW YORK (Reuters) - Citigroup Inc's (C.N) problems deepened on Monday as it was unable to assure investors a potential $11 billion write-down for subprime mortgages won't grow, and its nearly pristine credit rating was downgraded.

The largest U.S. bank also reduced previously reported third-quarter profit because of credit market problems that it said could reduce future cash flow.

Citigroup is also struggling with a void in permanent leadership, following Sunday's resignation of Chairman and Chief Executive Charles Prince.

Robert Rubin, former U.S. treasury secretary and chairman of Citigroup's executive committee, was named chairman. Sir Win Bischoff, head of Citigroup Europe, was named acting chief executive.

The announcement of an expected $8 billion to $11 billion write-down, equal to $5 billion to $7 billion after taxes, caused Citigroup shares to fall as much as 5.6 percent.

Shares of other banks such as Bank of America Corp (BAC.N), Merrill Lynch & Co (MER.N) and Morgan Stanley (MS.N) also fell in early trading, on concern write-downs might not be isolated to Citigroup.

"It shows the clumsiness of pricing mechanisms across Wall Street," said Michael Holland, founder of Holland & Co. in New York. He said it's tough to value Citigroup "until the dust settles."

Much of Citigroup's trouble relates to $43 billion of so-called collateralized debt obligations linked to lower-quality mortgages.

While these "super-senior" securities were once considered rock-solid, investors have stopped buying them, the bank said.

"There's no way I think anyone can give you an assurance of how things are going to move," Chief Financial Officer Gary Crittenden said on a conference call. "We've taken what we think is a reasonable stab."

DOWNGRADE

Fitch Ratings cut Citigroup's credit rating to "AA," its third-highest grade, from "AA-plus," citing "severe pressure" on capital markets operations and "an inhospitable consumer credit environment" as mortgage delinquencies soar.

Its outlook is negative, meaning another cut is possible within two years. Standard & Poor's may cut its own "AA-plus" rating.

Citigroup also lowered third-quarter profit to $2.21 billion, or 44 cents per share, from the reported $2.38 billion, or 47 cents.

The reduction means profit fell 58 percent from a year earlier, and brought the total quarterly write-down to nearly $6.8 billion. That write-down also included leveraged loans and consumer loan losses, as well as subprime mortgages.

Citigroup shares fell $1.76, or 4.7 percent, to $35.97 in morning trading, after earlier falling to $35.61. They began the year at $55.70.

WANTED: CEO WITH INTERNATIONAL FOCUS

The problems come as Rubin and Bischoff try to restore morale, while hunting for a permanent chief executive.

Four directors, including Rubin and longtime Time Warner Inc (TWX.N) Chief Executive Richard Parsons, are conducting the search.

CNBC, meanwhile, reported that Parsons is to step down from his job at Time Warner and be replaced by Chief Operating Officer Jeffrey Bewkes.

Rubin, who was treasury secretary under President Bill Clinton, said he wants someone at Citigroup with the capacity to "relate ... to the multiplicity of businesses this institution has."

A candidate needs a "strong international focus, not necessarily enormous international experience," he said.

Citigroup declined to say how long the chief executive position will remain unfilled. "I look forward to an interesting but relatively short period of months before handing over to the next CEO," Bischoff said.

Saudi Prince Alwaleed bin Talal, Citigroup's largest individual investor, wants to bring back Prince's predecessor Sanford "Sandy" Weill on an interim basis, CNBC television said.

Prince's departure came five days after Merrill ousted its own chief executive, Stanley O'Neal, following a $8.4 billion write-down.

(Additional reporting by Joseph A. Giannone, editing by Dave Zimmerman)