Pandit has tough road ahead at Citigroup

NEW YORK (Reuters) - Vikram Pandit, Citigroup Inc's(C.N) new chief executive, has taken on one of the toughest jobs in corporate America. Whether he is up to running the largest U.S. bank and fixing its many problems remains to be seen.

Pandit replaces Charles Prince, who resigned November 4. Prince's rocky four-year tenure culminated in the largest U.S. bank's announcement of up to $12.8 billion of charges tied to subprime mortgages, with potential for billions of dollars of additional losses from home loan and credit card operations.

Now Citigroup is in the hands of a former Morgan Stanley banking and trading head with no experience leading a consumer business, which generates more than half of overall revenue. And Pandit has been with the bank only five months. He has never run a company close to the size of Citigroup with its $2.4 trillion in assets.

William Smith, CEO of SAM Advisors, a Citigroup shareholder and long-time critic of the company, panned Pandit's ascension, which was announced on Tuesday.

"It's disappointing. Pandit is probably a decent manager, but he is a segment manager," Smith said. "He is not a CEO."

Smith is pessimistic about the bank's future. He expects more stumbles, which could force a breakup of the company.

Citigroup shares have fallen 40 percent this year, and the bank agreed last month to sell a $7.5 billion stake to Abu Dhabi's government to shore up capital.

Analysts have said a dividend cut is possible, and there is talk of job cuts above the 17,000 announced in April. Citigroup employs in excess of 300,000 people in more than 100 countries.

FROM NAGPUR TO WALL STREET

Born in Nagpur, India, 50-year-old Pandit earned bachelor's and master's degrees in electrical engineering from Columbia University in New York City. He received a doctorate in finance from the school in 1986.

At Morgan Stanley, he headed institutional securities, overseeing banking, trading, prime brokerage and investments, and was credited with expanding outside the United States.

While his unit performed well, Pandit often sparred with fixed-income chief Zoe Cruz, who said he was too conservative and unwilling to use leverage to magnify bets. When Chief Executive Philip Purcell promoted Stephen Crawford and Cruz to co-presidents in March 2005, Pandit left.

Purcell, Crawford and Cruz have all since left Morgan Stanley -- the latter after getting burned by ramped up trading risks.

Pandit resurfaced at Old Lane Partners LP, a hedge fund and private equity group he set up with other Morgan Stanley alumni. Assets grew to $4.5 billion.

When Citigroup agreed in April to buy Old Lane for about $800 million, analysts viewed it as a costly way to shore up the executive ranks following a string of departures, including Willumstad, consumer banking chief Marjorie Magner and wealth management chief Todd Thomson.

Pandit was originally hired to lead alternative investments, but in October added oversight of investment banking after yet another management shake-up in the wake of billions of dollars of losses from mortgages, leveraged loans and trading. Quickly, he combined equity and debt market operations, two years after Morgan Stanley did the same.

OTHERS PASSED ON THE JOB

Pandit was not the only person approached for the job. NYSE Euronext's (NYX.PA) (NYX.N) John Thain passed up a possible shot at running Citigroup for the same job at Merrill Lynch & Co MER.N. Josef Ackermann, chief executive of Deutsche Bank AG (DBKGn.DE), also rebuffed an approach, according to press reports.

Others whom outsiders had suggested might make a good fit included American International Group Inc (AIG.N) Chairman and former Citigroup Chief Operating Officer Robert Willumstad, Barclays Plc (BARC.L) President Bob Diamond, Wells Fargo & Co (WFC.N) Chairman Richard Kovacevich, and internal candidates like Latin American chief Manuel Medina-Mora and Chief Financial Officer Gary Crittenden.

Crittenden joined Citigroup in March after Prince said he wanted a CFO who might eventually ascend to chief executive.

Timothy Ghriskey, chief investment officer at Solaris Asset Management, said when the dust settles there will be positive reaction to Pandit's appointment as CEO.

"Pandit's name has obviously been floated out there for quite a while now, that big investors would have had time to speak up," Ghriskey said. "They would not have done this if they hadn't gotten favorable response from their large investors. People have already gotten used to the idea."

(Additional reporting by Joseph A. Giannone; Editing by Toni Reinhold)