Ailing Citigroup signals reform, not breakup

Citigroup Inc. named a veteran retail banker Monday to head its North American consumer banking unit, splitting it off from its credit card business as Citi struggles to regain profitability after suffering the biggest quarterly loss in its 196-year history.

The latest move is the most visible sign yet that Chief Executive Vikram Pandit, appointed in December, wants to fix Citi’s major parts rather than sell them off to raise cash, at least for now.

It also addresses shareholder concerns over what steps Pandit would take to attract more consumers to Citi’s retail banking unit.

Citi’s worst problems are in its investment-banking segment, which made huge losing bets on the mortgage industry. But its bread-and-butter business of lending to and collecting deposits from average people has also been underwhelming shareholders.

Citi is ubiquitous throughout the U.S. but in recent years has lost customers to rivals such as JPMorgan Chase & Co. and Wachovia Corp.

The quality of service at Citigroup branches has “room for improvement,” said Marino Marin, managing director at boutique investment bank Gruppo, Levey & Co. “They need to regain the trust of the customer.”

Pandit’s new hire, Teresa Dial, certainly has an impressive track record.

Dial, 58, spent nearly three decades at Wells Fargo & Co., including serving as president and CEO of its Wells Fargo Bank subsidiary. Since June 2005, Dial has led the turnaround of Lloyds TSB Group’s retail banking in Britain.

Meanwhile, Steven Freiberg -- the head of the old global consumer group, who will now lead the global credit card business -- brings 25 years of credit card experience at Citi.

In another change, Pandit is giving more autonomy to executives in Citi’s various locations around the world, most of which are growing faster than the flagging United States.

Overall, the changes point to an effort to decentralize management at the sprawling New York-based company. And, as Deutsche Bank analyst Mike Mayo wrote, they appear to rule out a radical restructuring or the sale of a major business or geographic region.

Nearly four months on the job, Pandit has reconfigured Citi’s mortgage business, closed some retail branches and made key hires in its investment bank and in risk management.

Most industry experts have been cautiously optimistic about Pandit’s incremental moves. “He’s not selling Citigroup in pieces, but he’s dividing Citigroup into pieces to measure them better and manage them better,” Marin said.

Citigroup shares rose 59 cents to close at $21.42 on Monday.