Citigroup shakes up top management, replaces CFO

Citigroup c is shaking up its top management — again.

On Thursday, the beleaguered global bank named John Gerspach its third chief financial officer of the year, reflecting growing turmoil at the bank's top ranks. Gerspach was Citi's controller and chief accounting officer.

"This reflects the ongoing process of ferment at Citi's top management," says Richard Bove, analyst at Rochdale Securities. "At a time when they need stability, employees will feel pushed and pulled in various directions along with the leaders they serve."

Edward "Ned" Kelly, who was just named CFO in March, was named vice chairman of Citigroup. In his new role, Kelly will work closely with CEO Vikram Pandit and will be responsible for the bank's strategy, including mergers and acquisitions. This newly created position fueled speculation that Kelly is being positioned to become CEO soon.

It also may reflect pressure on Citi to reshape management as the U.S. government is about to become its largest shareholder. "The minimum the government would want out of bank management is that they know how to handle typical bank issues, and Citi doesn't have that," says Cassandra Toroian, chief investment officer at Bell Rock Capital.

Pandit has run a hedge fund and also was the head of the securities division at Morgan Stanley, but he never ran a bank or complex financial institution before Citi. However, Kelly served as CEO of Mercantile Bank for five years prior to joining Citi. Citi declined comment on speculation about Kelly's role.

Citi has emerged as the weakest among the larger banks from the financial meltdown. Rivals JPMorgan Chase and Goldman Sachs have been quick to pay back the government billions of dollars the banks received in the midst of the turmoil. But Citi hasn't been able to return any, and in fact has moved the other way. This month, the government will become Citi's largest shareholder, when a part of its $45 billion investment will be converted into a 34% stake.

Citi has also had a series of high-profile senior executives depart. Gary Crittenden, who was CFO through March, is leaving the company to spend more time with his family, Citi said. His departure comes less than a month after another top executive, Ajay Banga, CEO of Citi Asia Pacific, also left. Former CFO Sallie Krawcheck left Citi last September.

"It's pretty dysfunctional right now because people with experience are leaving, and morale is unbelievably low," says William Smith of Smith Asset Management, a shareholder.