Updated from 8:01 a.m. EDT

Citigroup ( C) shook up its management ranks on Friday, moving CFO Gary Crittenden to head a new unit housing unwanted assets and former global banking head Edward 'Ned' Kelly into Crittenden's old role.

Citi announced in January it was splitting its businesses into two firms -- Citicorp, encompassing the bank's core assets, and Citi Holdings, which will house mostly unwanted assets and units it is looking to unload. Citi shares closed up 2 cents to $2.62.

"Gary and Ned will build on our early accomplishments and help to meet our strategic objectives at Citicorp and Citi Holdings," Citi CEO Vikram Pandit said in a statement on Friday.

Analyst Richard Bove questioned the decision.

"Edward Kelly has a superb reputation, but there is nothing in his background that suggests that he is qualified for this job," Bove, an analyst at Rochdale Securities, writes in a note. "Why is Mr. Kelly in position? The word 'cronyism' comes to mind."

Pandit became CEO in December 2007 after ex-chairman and CEO Charles Prince was forced out over the billions in losses the company took related to securities writedowns as the housing and financial meltdown rolled on. Pandit has been gradually hiring and appointing his own team of leaders, including Kelly.

"If a new CFO had to be found, I would have been more comforted if one with financial skills in running this position were selected," Bove writes.

Some, including Bove, say it is a possibility that Kelly could eventually replace Pandit.

Kelly previously served as head of global banking at Citi Private Bank, and president and CEO of Citi Alternative Investments in the bank's institutional clients group.

Kelly, a lawyer early on in his career, worked in various positions at JPMorgan Chase's ( JPM) investment bank in the mid-to-late 1990s. He was also the former CEO of Mercantile Bankshares, a small bank based in Baltimore that he eventually sold to PNC Financial Services ( PNC) in 2007.

"He is much more suited to be a CEO than he is a CEO," Bove says. "Now you got a couple of people in the company that could in fact take Pandit's job."

Bove was referring to former US Bancorp ( USB) CEO Jerry Grundhofer, who was named to Citi's board of directors, along with three others, this week.

Bove wrote in a note on Tuesday that Grundhofer is a viable successor to Pandit.

Crittenden joined the firm as CFO in March 2007 from American Express ( AXP) . He will work with the interim CEO of Citi Holdings, Mike Corbat, "to optimize the value of businesses in this unit," Citi said.

"When Gary joined Citigroup from American Express it was former chairman and CEO Charles Prince that brought him in. In his mind he probably saw this as a stepping stone to become CEO, because Chuck was in a weak position," says one partner at an executive search firm, who asked not to be named.

Yet, from Pandit's perspective "Gary was not his CFO," he says. "The move to the holding company ... he'll just be there for a few months and then he will move on to do something else," particularly because Crittenden will not be holding an operating role, such as CEO.

The Associated Press, citing a person familiar with the decision, is reporting that Crittenden decided to change jobs due to an illness in the family.

The chairman position at Citi Holdings was created for Crittenden and will be a part-time responsibility overseeing the long-term strategy of Citi Holdings, this person said, according to the AP.

Harlan Platt, a finance professor at Northeastern University, said he sees the move as a promotion.

"CFOs suffer from a label that may or may not apply to all of them that pigeonholes them in that responsibly. Occasionally a CFO breaks out and takes on more general management responsibilities," Platt says.

"This is an example ... where you have somebody whose talents have come to the surface and have been recognized," he adds. "This is an anticipatory change so that the spun off company will have a cadre of executives that will be well accepted on the Street so that the valuation of the assets will be high."

Bove also speculated that perhaps Crittenden "simply has had enough of the government telling him what to do," he writes. "He may see Citi Holdings as an opportunity to escape these onerous conditions and at the same time certify his reputation as a leader who can fix problems. He may view this as an opportunity."

Crittenden's only task is to "get rid of these divisions," Bove says. "He presumably escapes the government altogether because there is one task -- sell this stuff."

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