Citi Needs More Than Prince to Avoid Pauper's Grave

"Given the support from the various federal programs, we don't think Citigroup is on the verge of a Lehman-like implosion," writes Kathleen Shanley, a fixed income analyst at Gimme Credit. "But our optimism that the bank was poised to re-establish its credibility as a leading U.S. financial institution with the Wachovia deal was, alas, premature. We no longer see a near-term potential for Citigroup to outperform other major banks."

Shanley lowered her rating on the firm to underperform from a buy rating.

Citi has been battered over the past year and a half, having posted four consecutive quarterly losses. Citi lost $2.8 billion during the third quarter. Analysts widely expect it to post a fifth consecutive loss as well.

Deutsche Bank analyst Mike Mayo wrote in a note on Tuesday that he now expects the firm to post a loss for 2009.

"Citi is taking aggressive action out of necessity and still has to resolve many issues that have been around for a while," Mayo writes in a note.

Earlier this week, Citi said it plans to cut an additional 53,000 jobs on top of 22,000 cuts previously announced. The job cuts are part of a broader plan to reduce expenses in 2009.

Despite Citi's efforts to turn the company around, the vague details surrounding those initiatives may not be enough, some say.

In addition, rumblings have increased that a shake-up at the very top tier is necessary. Last week reports surfaced that board members were increasingly dissatisfied with the company's performance and considering whether to replace Chairman Sir Win Bischoff. Citi denied the speculation.

Frank Barkocy, the director of research at Mendon Capital Advisors, the fund manager to Burnham Financial Services Fund, says Pandit's unwillingness to offer a "definitive game plan" explaining the layoffs and acquisition efforts has hurt the company, already reeling from the pounding the financial sector is taking.

"Give us a sense of what are you looking for and how will this proposed acquisition fit in with game plans going forward," he says.