NEW YORK — Citigroup Inc.'s chief executive officer, Vikram Pandit, plans to name John Havens as president and chief operating officer. The move is part of a structural overhaul meant to address the bank's efforts to expand as it tries to put the lingering effects of the financial crisis behind it.
Mr. Pandit briefed the board on the management change Tuesday after the bank reported quarterly profits of $1.3 billion, up from a $7.6 billion loss in the fourth quarter of 2009, when Citi had to repay the U.S. government for certain costs of a rescue earlier in the year. But profits were down 11% from the third quarter.
The fourth-quarter earnings of 4 cents a share startled investors because it was just half the level that Wall Street analysts had expected. Citigroup's stock, which had surged 15% after the U.S. sold the last of its Citigroup common shares in early December, slipped by 33 cents a share, or 6.4%, to $4.80 on Tuesday.
The promotion of Mr. Havens, a longtime colleague of Mr. Pandit's, will cut the number of executives reporting directly to Mr. Pandit by half from a current unwieldy 18, according to people familiar with the matter. The new lineup could speed decision-making, these people say.
Mr. Havens, 54 years old, who has led Citi's institutional clients group for the past three years, can relieve Mr. Pandit of some front-office responsibilities as the Citi CEO emerges from crisis mode to focus on growth.
James Forese, a 25-year veteran of the Salomon Brothers securities business which became part of Citi in 1998, will gain greater authority over the institutional business in a promotion from his current role as co-head of global markets.
The management shake-up is the most extensive since Mr. Pandit became chief executive in December 2007. But it doesn't have any implications for succession, according to people familiar with the matter, because Messrs. Pandit and Havens are considered a team, and Mr. Havens would likely depart if Mr. Pandit stepped aside. Former Time Warner Inc. Chief Executive Richard Parsons remains Citigroup's chairman.
Mr. Havens has worked with Mr. Pandit for 25 years since their days in the securities business at Morgan Stanley, which they left together in 2005 amid a management civil war. Citi acquired a hedge fund they formed, Old Lane LP, for $800 million in early 2007.
In naming Mr. Havens, Mr. Pandit is elevating an executive whose division has had a rocky ride. Since 2007, Citi has fallen from No. 1 to No. 6 in global securities underwriting, and from No. 3 to No. 8 in announced mergers, according to Thomson Reuters. In the most recent quarter, the securities and banking unit saw revenue fall 17% to $4.6 billion, excluding an accounting adjustment.
The latest quarterly results, which represent the first full year of profits under Mr. Pandit's three-year leadership, still underscore Citi's fragility after one of the nation's biggest banks nearly collapsed during the financial crisis. Analysts said the results showed how Citi came through the market meltdown in a more-tenuous condition than some rivals such as J.P. Morgan Chase & Co., whose fourth-quarter profit of $4.8 billion rose 9% from the third quarter.
While Citi's quarterly profits weakened steadily throughout 2010, JPMorgan's rose in each quarter. JPMorgan Chase is "just a little further down the path of completely turning it around," said Gerard Cassidy of RBC Capital Markets.
Citi's results were hurt by rising expenses, which rose 8%, reflecting a multiyear commitment to spend more $3 billion to rebuild its consumer franchise, especially in overseas markets where it has an extensive payments network.
In explaining the earnings shortfall, Chief Financial Officer John Gerspach also cited a $1.1 billion charge, which reflected rising values for Citi debt that cut its ability to buy back the debt at a profit.
Earnings also were hurt by weaker results at institutional securities, due to declines of 32% and 24% in bond and stock trading respectively from the third quarter. Mr. Gerspach also blamed the higher expenses partly on the impact of the weaker dollar.
In the fourth quarter, revenue fell 11% to $18.4 billion, despite improvement in credit losses, which also fell 11% to $6.9 billion, and a greater release of loan-loss reserves, which increased 14% to $2.3 billion.
Citi reported its first full-year profit in three years of $10.6 billion, or 35 cents a share, up from a loss of $1.6 billion in 2009. It last earned a profit in 2007 of $3.6 billion. Revenue rose 7.8% for the year to $86.6 billion.
Mr. Pandit, who had vowed to accept only $1 a year in pay until Citi returned to profitability, said, "If you had said a year ago that we would have accomplished what we have, I am not so sure too many people would have believed it."