Citigroup names Pandit CEO, Bischoff chairman

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Citi had been seeking a replacement for former CEO Charles Prince, who left on Nov. 4 under pressure from shareholders frustrated by the performance of the largest U.S. financial services company. Citi shares have fallen by about a third this year, and the company has taken massive write-downs for mortgage-related holdings.

The appointment of Bischoff, 66, was a surprise. A director at Citi, he has served as acting CEO. Former Treasury Secretary Robert Rubin, who has served as chairman in the interim, will return to his duties as chairman of the executive committee.

Pandit's career has included heading investment banking and capital markets at Morgan Stanley. He joined Citigroup five months ago when the bank bought his year-old hedge fund firm, Old Lane Partners, for $800 million.

But some investors expressed concern that the 50-year-old, India-born executive has never run a public company, let alone one as big and complex as Citi.

"There was some hope that somebody with a bigger name would be chosen so maybe from that perspective there is some disappointment," said Lee Delaporte, director of research at Dreman Value Management, which has some $22 billion of assets but has sold its Citi holdings.

Citigroup made the announcement at 2:15 p.m. on Tuesday, the same time the U.S. Federal Reserve had a scheduled announcement on interest rates.

Shares of Citi fell 4.2 percent to $33.30 by the close of trading on the New York Stock Exchange. Financial stocks fell on disappointment that the Fed did not cut rates further.

Citi's board came under fire in recent months as Prince-led Citigroup reported billions of dollars in credit losses, and the board may face more criticism for what some investors have called a disappointing management search.

Merrill Lynch won praise for recruiting NYSE Euronext chief and former Goldman Sachs President John Thain to replace chief executive Stan O'Neal.

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