Citigroup Inc. Chief Executive Officer Vikram Pandit, who ledthe bank through a U.S. bailout while reaping $261 million forhimself, was replaced by Michael Corbat, who said he may make shakeup the firm's operations.

President and Chief Operating Officer John P. Havens, 56, alsoresigned, the New York-based bank said today in a statement.Corbat, who led Citigroup in Europe, the Middle East and Africa,takes the helm immediately as Pandit, 55, leaves both his executiverole and his seat on the board.

The departures, announced six months after Michael O'Neillbecame chairman, remove a team that led Citigroup out of 2008'sglobal credit crisis. While Pandit posted a surprise quarterlyprofit yesterday, he suffered setbacks this year when regulatorsblocked his plan to boost dividends, shareholders rejected his paypackage and Morgan Stanley came out ahead in a multibillion- dollardispute over a jointly owned brokerage venture.

Corbat told the staff in a memo he's “a true believer in thiscompany” after spending his entire career at Citigroup. “I'm goingto take the next several weeks to immerse myself in the businessesand review reporting structures,” he wrote. “These assessments willresult in some changes.”

Shares of New York-based Citigroup, the third-largest U.S. bank,rose 0.2 percent to $36.74 as of 10:45 a.m. in New York. While thestock had gained 39 percent this year through yesterday, it remainsdown about 90 percent since Pandit was publicly named as CEO inDecember 2007 when losses tied to the brewing financial crisisdrove out his predecessor, Charles O. “Chuck” Prince.

Sudden Change

“Given the progress we have made in the last few years, I haveconcluded that now is the right time for someone else to take thehelm,” Pandit said in the statement. “Mike is the right person totackle the difficult challenges ahead.”

Investors were caught off guard by the change, according toanalysts at Bank of America Corp., who wrote in a note to clientsthat O'Neill's rise to chairman may have triggered Pandit'sdeparture. The CEO was focused on strategic vision while O'Neillwas more concerned with operations, the note said.

O'Neill, 65, a former CEO of Bank of Hawaii Corp., was amongdirectors who joined in 2009 to bolster the panel's bankingexperience after its bailout. He chaired a committee that oversawCiti Holdings, which would have brought him into close contact withCorbat, who was CEO of the unit at the time.

Bair's Assessment

Pandit's departure will help the company, said Sheila Bair, whoclashed with him when she was chairman of the Federal DepositInsurance Corp.

“This was a very positive move,” Bair said today in an interviewwith Tom Keene on Bloomberg Radio. “I did have concerns about Mr.Pandit's qualifications to serve as the CEO of the largestcommercial bank, because he had never been a commercialbanker.”

Corbat, 52, has worked at Citigroup and predecessor companiessince graduating from Harvard University in 1983, according totoday's statement. He was previously CEO of Citigroup's Europe,Middle East and Africa operations, overseeing consumer banking,corporate and investment banking and trading in that region. Beforethat, he was CEO of Citi Holdings, where he oversaw more than 40divestitures.

“The international business is where they live and die, sohopefully this fellow, because of his background, is going to beable to focus on that and retain that and then develop a model forthe future,” said Chris Whalen, a senior managing director atTangent Capital Partners LLC, on Bloomberg Television. Themanagement change “is very disorderly and I think they need toexplain to us why this timing made sense from the board'sperspective.”

Pandit's Pay

If no alterations are made to Pandit's compensation, Citigroupwill have paid him about $261 million in the five years since hebecame CEO, including his personal compensation and about $165million for buying his Old Lane Partners LP hedge fund in 2007 in adeal that led to his becoming CEO. The bank shut Old Lane soonafter Pandit took the post, causing a $202 million writedown.

Pandit spent 22 years at New York-based Morgan Stanley beforequitting in 2005 amid a power struggle under then-CEO PhilipPurcell. Havens, who ran equities at Morgan Stanley, quit aroundthe same time and in 2006 helped Pandit start Old Lane.

Citigroup bought the hedge fund in 2007 for $800 million andincorporated it into Citi Alternative Investments, the bank'sprivate-equity, real estate and hedge-fund investment division.Pandit was placed in charge of the unit, which had lacked afull-time CEO for about a year.

The bank shut the fund shortly into Pandit's reign as CEO, amida spate of hedge-fund failures, purchasing its assets and allowinginvestors to take their money out.

“It will be very interesting to see how Corbat changes themanagement structure,” said Thomas Brown, CEO of hedge fund firmSecond Curve Capital LLC, on Bloomberg Television. “They couldbecome a much more competitive company.”

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