Citi Shake-Up Could Signal Asset Sales

Pandit is essentially "trying to tear the place apart and get people to function," says Anton Schutz, president of Mendon Capital Advisors and the fund manager to Burnham Financial Services, which owns shares of Citi. "A lot of assets he had were underperforming for a long period of time [such as the credit card business]. ... You don't want to sell something at a point of weakness."

"The reality is this company had a number of businesses that performed relatively poorly over some period of time," Schutz says. "I do believe there is a pretty valuable franchise underneath the securities portfolio and operating issues. [Both problems] may sort of come together at the same time."

While the credit card business is better served from a global perspective so that it can achieve scale and compete against large competitors such as JPMorgan Chase(JPM - Cramer's Take - Stockpickr) and Bank of America(BAC - Cramer's Take - Stockpickr), the rest of the consumer businesses, retail banking and mortgages, should be decentralized so that they can respond to regional needs, observers say.

"I don't think he is thinking breakup," says Jeff Harte, an analyst at Sandler O'Neill & Partners. "[Pandit] is trying to run the business better."

Harte notes that critics who are in the camp of breaking up the businesses often don't take into account the fact that some of these businesses are often cash generators like Citi's wealth management arm, Smith Barney, and the credit card business.

"There are advantages to being all together from a capital perspective," Harte says. And capital is certainly something that many banks, including Citi, are looking for these days. He rates the company at hold.

But Harte wonders how much more patience investors will have for the banking titan to prove to that it is still a good investment opportunity. It's possible that Citi as is, could be "too large a ship to be steered," he says.

Solaris' Ghriskey says the chain of command Pandit is proposing "simply makes more sense to us."

"This is a better line of reporting to control risk and control the business, but in the near term this doesn't address any issues that are currently plaguing the bank or the system," he adds. "But a lot of this -- there is not much Citi can really do in this current environment other than wait for the credit issues to simply play out."

Deutsche Bank analyst Mike Mayo estimates that Citi is looking at $18 billion in writedowns during the first quarter, according to a note on Monday. He has a sell rating on the company.

"Citi's business reviews are ongoing but today's announcement seems to rule out a radical restructuring or sale of the major product or geographic areas," he writes. "Yet we still expect about 15% [to] 20% of Citi's balance sheet to get reduced via downsizing, discontinued [operations], asset sales and/or sales of smaller businesses."

Citi shares closed up 2.8% to $21.42 on Monday.