Citigroup Inc. (C) appointed Sallie Krawcheck (search) as its No. 2 executive Monday in a surprise management shuffle designed to cultivate a new leadership at the world's largest financial services company.

Krawcheck, 39, already viewed by many as the most high-profile woman on Wall Street with the pending departure of J.P. Morgan Chase & Co. (JPM) Chief Financial Officer Dina Dublon (search), will become Citigroup's chief financial officer and head of strategy effective Nov. 5.

She replaces Todd Thomson, who will take her job as head of brokerage and research unit Smith Barney.

The appointments, which took many analysts and investors by surprise, marks the latest step in Krawcheck's rapid ascension up Citigroup's corporate ladder. Some predicted the job swap also would offer an early test in the battle to become heir apparent to Chief Executive Charles "Chuck" Prince.

"Prince is setting up the next generation of leaders for Citi," said Jason Goldberg, senior analyst at Lehman Brothers. "Sallie gets more global and direct finance exposure. Tom gets business line exposure. It broadens both their capabilities."

Krawcheck was appointed head of Citigroup's retail brokerage operations two years ago amid much fanfare as the financial services company looked to reorganize its operations under an intense spotlight from securities regulators.

A former analyst who went on to head up Sanford C. Bernstein's (search) retail brokerage operation, she restructured a Citigroup research operation tarnished by a conflict of interest investigation by New York Attorney General Eliot Spitzer (search) and the National Association of Securities Dealers (search).

She trimmed Smith Barney's work force and research scope, while focusing on improving the group's stock-picking accuracy.

While net income in Citigroup's private client services division fell slightly last year in her first full year in the position, profits are up nearly 33 percent through the first six months of 2004, while revenue has climbed 19 percent.

"The selection of Ms. Krawcheck is a bit of a shock for a number of reasons," said Richard Bove, an analyst with Punk, Ziegel & Co. in a research note. "She has a superb reputation and is believed to have turned Smith Barney around. However, she has never been a Comptroller, Treasurer, or CFO anywhere else. Her entire business experience is in the securities industry."

Still, Bove noted that Prince may be looking to send a message to the rest of the company. Citigroup faced a series of embarrassments in its international operations this month, including having to shut down its private banking operations in Japan after regulators found several violations.

"Mr. Thomson may have been re-assigned as an indication to all that if the non-financial results at this company do not improve everyone's job is at risk," Bove said.

Thomson, 43, will assume Krawcheck's post as chairman and chief executive of Smith Barney, the company's global private client wealth management and equity research unit.

Thomson was named chief financial officer in 2000 after running Citigroup's private banking operations.

"We are providing these two talented and accomplished executives the opportunity to build upon their skills and capabilities, while furthering our goal of creating a broadly experienced next generation of leaders of Citigroup," said Prince in a statement.

Citigroup shares fell 51 cents, or 1.2 percent, to $43.64 in mid-morning trading on the New York Stock Exchange amid a broader fall in the market triggered by rising oil prices.