Citicorp, one of the most aggressive banks in mutual fund sales, is dramatically revamping its approach to the business.

The money-center giant has created a high-level management group to oversee investment products and distribution. David J. Browning, a 20-year veteran of Citicorp, was recently plucked from his position as head of the structured finance group to lead the effort.

Further changes may be in the offing. Arnold E. Amstutz, chairman of Citicorp Investment Services, a retail brokerage, is expected to announce an overhaul of the company's mutual fund-selection process at a meeting with vendors later this month.

What's more, industry sources say, the banking company is looking at placing the brokerage - currently part of the consumer bank - under the banner of Citicorp Global Asset Management, a money-management arm with $74 billion under its control.

A Citicorp spokeswoman said that "obviously something will change" now that the company is sharpening its focus on consumer investments. However, she said, there are no plans "at this time" to put the asset management unit in charge of the brokerage.

Sources close to Citicorp said the moves are part of a drive to revitalize an investment products program that has lost some of its vigor in the past year.

Though Citicorp's fund sales are believed to have reached $2 billion in 1994 - one of the best showings in the banking industry - the company is said to be disappointed with its progress. Citicorp executives have made no secret of their desire to compete with brokerage giants such as Merrill Lynch.

Their frustrations came to the surface in a meeting with mutual fund vendors last month. The brokerage chief, Mr. Amstutz, said sales were down sharply and described the investment services unit's profitability as "terrible," according to people who attended the session.

However, Citicorp chairman John S. Reed put an upbeat spin on the reorganization in a little-noticed statement issued last month. He said the new group was formed "to expand Citicorp's role in meeting our customers' needs for investment products.

Bank analysts contacted this week greeted the changes favorably. The creation of a group-level organization "signals the growing importance of investment products in Citicorp's consumer banking business," said Raphael Soifer, a banking and financial services analyst with Brown Brothers Harriman, New York.

These groups, known in Citi lingo as the G-15, are the third tier in the banking company's hierarchy - just two levels below Mr. Reed.

The selection of Mr. Browning to head the investment products effort drew mixed reviews from observers.

Little known in the investment products arena, Mr. Browning, 45, was head of structured finance for the past two years, until being appointed executive vice president of Citi's global asset management group last month. Earlier, he ran the bank's national corporate division.

One Citicorp veteran, who asked not to be named, said Citi's leveraged lending and high-yield businesses lost substantial market share under Mr. Browning's watch.

But Mr. Soifer, the bank analyst, said he saw Mr. Browning's appointment as a promotion to a very important post.

"That area is one I expect to see some growth in, so it doesn't seem to me that they are putting him out to pasture," Mr. Soifer said.

Others said the decision to combine oversight of sales and management of investment products was long overdue.

While Citicorp has done a good job selling investment products, "there has been less focus on having a clear strategy," said Kenneth Hoffman, president of Optima Group, a consulting firm in Fairfield, Conn.

Under Mr. Browning, observers said, the investment products group is likely to focus on attracting more assets to the proprietary Landmark Funds, improving the performance of the funds, and overhauling its approach to selection and sales of nonproprietary products.

Though Citicorp is the nation's largest bank, its Landmark Funds rank 28th among all bank-managed fund families, with $3.1 billion in assets as of yearend, according to Lipper Analytical Services, Summit, N.J. Assets grew a scant 4.7% in the year, Lipper's data shows.

As for nonproprietary funds, signs of a strategy shift have been emerging for months.

Mr. Amstutz was hired last January to spearhead an expansion of Citicorp Investment Services. In a November interview with the American Banker, he said he had begun talking to several mutual fund companies about striking "exclusive" deals to offer their products - a move that observers saw as a big shift from Citi's practice of offering 650 funds.

And last month, the brokerage unit's "gatekeeper," Susan L. Malley resigned. She had been responsible for picking which funds Citicorp brokers could sell. That move was taken as evidence that Citicorp was about to change its fund selection process.

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