Big bank, big task for the new leader

Running Citigroup (NYSE:C) should be an attractive job. It is one of the biggest banks in the world, with over 300,000 employees in 100 countries. But the search committee led by Dick Parsons of Time Warner (NYSE:TWX) does not have an easy job. The question is not simply whether someone can do better than Chuck Prince at running Citigroup, but whether anyone can fully make sense of it.

Citigroup is the ultimate example of the breed of complex financial conglomerates that were built up in the 1990s as the boundaries between financial services were torn down. JPMorgan Chase, run by Jamie Dimon, a former Citigroup hand, is the only bank that approaches it in scale and diversity.

These banks must start by steadying themselves in the wake of the credit squeeze. Citigroup's scale used to be envied but its capital ratios are under pressure as a result of debt writedowns and it may feel the need to sell operations to put some money in the bank.

Mr Prince cleared up the legal problems left by Sandy Weill, the architect of Citigroup, but made less headway in convincing investors what Citigroup was for. Even before the subprime crisis, he faced pressure over the share price, which had meandered because of the lack of growth prospects.

Even smaller organisations, such as Merrill Lynch, which has just hired John Thain from the NYSE Group to succeed Stan O'Neal as its chief executive, face questions about their spread of operations. Many investment banks look enviously on Goldman Sachs, which has a more narrowly focused set of institutional businesses.

It is not beyond doubt that even organisations as big as Citigroup need to be broken up. There is already talk of Mr Thain perhaps merging Merrill into a commercial bank such as Bank of America (NYSE:BAC) to achieve scale. If Citigroup did not exist, plenty of people would be attempting to reinvent it.

But the challenge of running such a big organisation is now becoming clear. Few people have the appropriate experience and some of those may fear becoming consumed by Citi's size. That does not prove that Citi is too big to succeed but it should make its directors - and its new chief executive, whenever he or she arrives - ponder.