Citigroup, Under Pressure, Names New Chief Operating Officer

NEW YORK – Citigroup (C), under pressure to cut costs and boost revenues, named investment banking head Robert Druskin as chief operating officer.

Druskin, previously president and chief executive officer of Citigroup's corporate and investment banking unit, will first focus on reviewing the company's expenses, Citi's Chief Executive Chuck Prince said in a statement.

Investors have been pressuring the top U.S. bank by market capitalization to improve its financial performance since at least July, when the bank's largest shareholder, Saudi Prince Alwaleed bin Talal, said the bank needed to take "draconian measures" to control costs.

But shareholders dismissed the change as minor, and sent the company's shares down 1.6 percent in after-hours trading.

"It's an incremental change. I think Citigroup needs something more radical than this," said Ralph Cole, who helps manage $2.4 billion at Ferguson Wellman Capital Management, which owns Citi shares.

In recent trading sessions, Citigroup shares have risen to their highest level in two years, on hopes the company will reshuffle senior management and perhaps even break the company into pieces, but analysts said these sorts of changes are unlikely in the near term.

"Radical change might be in analysts' dreams, but it's not something on Prince's desk," said Michael Holland, founder of Holland Investments in New York, which owns Citigroup shares.

Other possible measures that Citigroup may consider in the near term include boosting its dividend by about 10 percent a year, said an analyst who asked not to be named.

Some investors say Citigroup is just too big for its breeches. Smaller companies are more focused, less bureaucratic, and better at allocating capital, wrote Tom Brown, who heads the roughly $500 million Second Curve Capital, in a report on bankstocks.com.

Brown estimated that Citi, which closed at $52.88 on the New York Stock Exchange on Monday, up nearly 2 percent, could be worth $61 a share if its domestic consumer finance, investment banking, international consumer finance, and retail wealth management businesses were split up.

Druskin, 59, will join Prince and Robert Rubin as members of the office of the chairman. All changes are effective Jan. 1.

In the first nine months of 2006, Citigroup's income from continuing operations rose 9 percent, but operating expenses rose 13 percent, and revenue rose just 5 percent.

Druskin will be succeeded as president of the commercial and investment bank by Michael Klein and Thomas Maheras.