A high-level reshuffling at Citigroup Inc. has underscored yet again the difficulty of forging a single enterprise out of investment banking and commercial lending, observers of the company said Monday.

Co-chairmen and chief executive officers Sanford I. Weill and John S. Reed announced the changes late Sunday. They were forced to act, by all accounts, because the two sides were unable to create the coherent corporate financial services business envisioned in the merger.

As a result, Citigroup president James Dimon resigned, leaving no clear heir apparent to the co-CEOs. And that left people inside and outside the $700 billion-asset company trying to understand how and where the chemistry went wrong.

As Citigroup's consumer businesses spent the summer and early fall harmoniously exploring how to cross-sell their products, the corporate sides of the old Citicorp and Travelers were colliding and never came up with a way to work together. Observers said the friction was evident almost from the moment the merger was announced in April. The deal closed Oct. 8.

"Initial meetings were cordial at best," said one observer who had attended some of them. "They came to the realization that they were both really different and that this wasn't necessarily going to be a good marriage."

"People believed that Sandy Weill had a card up his sleeve, that he was going to come up with a whole new model for a combined investment and commercial bank," said one observer, who like many contacted for this article asked not to be named.

"Now the Street wants to see what is behind the curtain," the source said. "What they will find is that the wizard has everything everyone else has. There is no model."

Aside from the ouster of Mr. Dimon, his co-head of investment banking, Deryck C. Maughan, was reassigned as vice chairman in charge of strategy development. Travelers executive Michael R. Carpenter was put in charge of the beleaguered Salomon Smith Barney.

Mr. Carpenter and Victor J. Menezes are the new co-heads of global investment and corporate banking, which outsiders see as a signal that Citigroup is turning its attention to cost-cutting and accountability.

Though the company billed Mr. Dimon's departure as by mutual agreement, many observers assumed he was forced out, perhaps because of severe losses in the third quarter that dragged down pro forma earnings for the company by 53%.

"I know Citigroup is poised for growth, so this is a perfect time for me to leave and regenerate with some new opportunities," Mr. Dimon said in a statement. He was not available for further comment.

In a conference call with employees Monday, Mr. Reed denied that the losses had anything to do with Mr. Dimon's departure, said Citigroup spokesman John M. Morris. "He said he and Sandy own those losses and that the whole action is forward-looking."

The integration problems in corporate and investment banking were the culprit, Mr. Morris said.

"There were very expected tensions," said one Salomon Smith Barney insider. Salomon investment bankers were viewed as "cowboys," by one account, in comparison with the more sedate Citibank lending culture.

At a meeting of 140 senior Citigroup executives 10 days ago, "there was disappointment that the integration of those businesses had not proceeded more completely," Mr. Morris said.

Several analysts said the new company is scrambling to make the best of what remains of Salomon, which was acquired by Travelers late last year and merged into Smith Barney. Earlier this summer, the company shut down the U.S. bond arbitrage business inherited through that deal and sharply curtailed bond arbitrage activities in Asia and Europe.

Still, efforts to reduce risk were not completely successful. The Asian economic crisis brought Travelers its first taste of investment banking volatility last winter. That was compounded this summer with the Russian currency devaluation and the downturn in global financial markets.

Mr. Dimon "had a tough job," said a Salomon managing director who left the firm in August. "He was handicapped in his job description and didn't have real line responsibility for putting the businesses together. But he thought he would have some time" to get that done.

"It's obvious now that Salomon was a huge mistake," said an analyst.

Mr. Reed has been very public about his distaste for investment banking. At a gathering of the Consumer Bankers Association last week in Florida, he said he was originally skeptical of the combination because "who wants to be part of Salomon?"

Consumer businesses were what convinced him to do the deal with Travelers, he said. He is wary of the other side's risks and doubts its growth potential.

"It's not a bad business," he said. "It's just a mature business, and the 'consumers' are probably taking advantage of their suppliers. They have shifted most of their risk to the shareholders of the bank."

The remnant of Citicorp appears to be evening the score after months of talk that Travelers was dominant in the merger. Observers said they see a clear shifting in Citigroup's focus toward consumer businesses, under Mr. Reed's guidance.

Mr. Dimon presided during a time when many Salomon bankers felt their power in the new firm was eroding. Newly appointed executives met in June and agreed to place Citicorp's lending division under control of the Salomon group.

But a Salomon banker who was in those meetings said decisions undermining that structure began to filter down in July from Robert McCormack, Citigroup's head of relationship banking, and William R. Rhodes, a vice chairman.

Among them: Citicorp lenders would be paid by the bank side, Citicorp would have its own credit committee, and Citicorp lenders would remain in their midtown New York offices.

That final decision, keeping the bankers away from Salomon's office near Wall Street, was taken by Salomon executives to mean that Citigroup's global lending operations would continue alone, and that corporate banking was taking a back seat to the consumer business.

"What you're seeing a shift in philosophy," said the former Salomon banker. "Jamie Dimon didn't like risk. He just embraced it as part of the game."

When it became clear that trading losses at Salomon would eat into third-quarter profits, head traders began to fear the worst. "There's a feeling people at Citibank are sharpening their scissors," said one banker.

Mr. Carpenter, 51, is the former chairman of Travelers Life and Annuity Co., who just weeks ago was designated to head Citigroup's affluent client market.

He will continue to oversee Smith Barney's private client services and will add investment banking and capital markets duties including underwriting, derivatives, and foreign exchange. His background includes a stint as head of Kidder Peabody & Co., the now-defunct brokerage.

Mr. Menezes, 49, is a veteran of Citicorp-including a stint as chief financial officer-and was one of four executives who helped negotiate the merger deal with Travelers.

In May, Mr. Menezes was tapped to be president of Citibank and to help coordinate the corporate bank's integration with Salomon, along with Mr. Dimon and Mr. Maughan. He will continue to oversee global relationship banking, emerging markets activities, and transaction businesses like cash management and securities services.

Mr. Dimon, 42, had been considered the most obvious heir to the empire, having been a longtime protege of Mr. Weill's.

Though Mr. Menezes is highly regarded, he is not widely considered the obvious new successor, especially as the organization is still a work in progress.

"The personalities aside, having two reporting to two is not an easy recipe for success," said Charles Wendel, chairman of Financial Institutions Consulting, New York. "I think the immediate heir apparent is Sandy Weill."

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