Oct. 12 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, said its trading chief will leave after almost $6 billion of fixed-income losses, and named former Morgan Stanley executive Vikram Pandit to oversee trading, investment banking and alternative investments.

Thomas Maheras and a top fixed-income executive, Randy Barker, are leaving the New York-based firm, Chairman and Chief Executive Officer Charles Prince said yesterday in a telephone interview. Pandit, 50, joined Citigroup earlier this year when he sold his hedge fund company to the bank for $800 million.

Maheras, 44, and Barker 48, are the first casualties at Citigroup following its disclosure last week that third-quarter profit fell 60 percent because of losses tied to the collapse of the subprime mortgage market. Merrill Lynch & Co., Bear Stearns Cos. and UBS AG have already announced high-level firings after being forced to book losses as a result of the worst shakeout in the credit markets since Russia's debt default in 1998.

``The company could have managed the turbulent credit markets better than it did, and obviously they're making personnel changes to address the problem,'' said Mark Batty, a Philadelphia-based analyst at PNC Wealth Management, which oversees $77 billion and owns 6.9 million Citigroup shares. ``They want personnel in place who are going to take risks but not undue risks.''

`The Field'

Pandit will run the newly formed institutional clients unit, which will include the investment banking and hedge fund divisions, the company said. James Forese, 41, Citigroup's head of stock trading, will fill the spot vacated by Maheras and will assume responsibility for all sales and trading. He will run the markets and banking group with Michael Klein, 43, who remains in his post overseeing underwriting, corporate finance, and mergers and acquisitions. Klein and Forese will both report to Pandit.

John Havens, who worked with Pandit at New York-based Morgan Stanley before they co-founded Old Lane LP, will run Citigroup's alternative-investments business, which includes hedge funds, private equity and real estate. Havens, 51, also will report to Pandit, the company said.

``My job is to always put the best team on the field,'' Prince, 57, said in yesterday's interview. ``The opportunities we have, which our results in the first half of the year show our ability to capitalize on, are best captured, best accomplished by the team we're putting on the field today.''

Sinking Shares

In his new role, Pandit will preside over divisions that generated almost $20 billion of revenue in the first half of 2007, accounting for 37 percent of the firm's total.

``These are interrelated businesses, and they have the same clients, they need the same infrastructure, and our view is that if they run on an integrated basis we can accelerate the growth,'' Pandit said in an interview.

Citigroup shares have fallen about 14 percent this year, exceeding the 2.5 percent decline of Bank of America Corp., the second-biggest U.S. bank, and the 3 percent drop of JPMorgan Chase & Co., the third largest. Citigroup declined 45 cents, or 1 percent, to $47.87 in New York Stock Exchange composite trading.

Deutsche Bank AG analyst Michael Mayo cut his investment rating on the stock to ``sell'' from ``buy,'' and lowered his price target to $44 from $60. Mayo wrote in his report that ``changes in the office of the chairman, which we feel are needed, are unlikely to be forthcoming.

Prince has faced criticism from shareholders, including Smith Asset Management President William Smith, for refusing to break up a company they say is too large and unwieldy.

Salomon Trader

Citigroup's stock price doesn't reflect the combined value of its parts, Mayo wrote in a report to clients last week. Saudi Prince Alwaleed bin Talal, Citigroup's biggest single investor, said on Oct. 2 that he supports Prince.

``He should be applauded not denigrated for his efforts,'' Punk Ziegel & Co. analyst Richard Bove said in a report today. Prince ``is doing everything that needs to be done to turn Citigroup around. He reinforced the concept of accountability.''

The 60 percent drop in third-quarter net income would cut Citigroup's profit to about $2.2 billion, according to data compiled by Bloomberg. The bank, which has about 200 million customers in more than 100 countries, is scheduled to release its latest earnings report on Oct. 15.

``Prince's fate may depend on how big the losses eventually get,'' said Yoji Takeda, who helps manage about $900 million at RBC Investment (Asia) Ltd. in Hong Kong.

Job Losses

Maheras, the son of a Greek immigrant, started his career as a Salomon Brothers trader more than two decades ago. Prince promoted him in 2004 to oversee fixed-income and stock trading, businesses that produced about $10.3 billion of revenue during the first half of the year, or 20 percent of Citigroup's total. He didn't reply to a phone call and e-mail seeking comment.

He's the highest-ranking executive to leave Citigroup since Prince ousted brokerage and private-banking head Todd Thomson, 46, in January, replacing him with Chief Financial Officer Sallie Krawcheck, 42.

Maheras's departure narrows the field of candidates to replace Prince, while Pandit's promotion raises his profile among them. Other potential successors include Klein, as well as current CFO Gary Crittenden and Krawcheck.

The list of senior banking executives who have lost their jobs because of mortgage-related losses keeps getting longer. It includes former Bear Stearns Cos. Co-President Warren Spector; Osman Semerci, the former global chief of Merrill's fixed-income division, and Peter Wuffli, the ex-CEO of Zurich-based UBS, Switzerland's biggest bank. UBS said Oct. 10 that senior bond executives David Martin and James Stehli also will leave the company.

Old Lane

Pandit, a former professor at Columbia University in New York, joined Morgan Stanley as a banker in 1983. He is credited with helping the second-biggest U.S. securities firm by market value win more initial public stock offerings and creating an electronic-trading system that cut transaction costs by 50 percent from 2002 to 2004.

He ran the firm's biggest and most-profitable division, investment-banking and trading, for five years before quitting in March 2005 during a power struggle under then-CEO Philip Purcell.

A year later, Pandit and former Morgan Stanley colleagues Havens and Guru Ramakrishnan opened Old Lane, with at least $2 billion from investors. Old Lane grew to $4.5 billion in assets under management and 120 employees in New York, London, Mumbai and Chennai, India.

Citigroup acquired Old Lane in April and put Pandit in charge of the alternative investments division.

His new post keeps him ``moving up the ladder,'' said William Fitzpatrick, an analyst covering financial companies at Johnson Asset Management in Racine, Wisconsin, which owns about 660,000 Citigroup shares.

``When they bought Old Lane, I couldn't believe the dollar amounts,'' Fitzpatrick said. ``So I looked into his background and I can see why he'd be a catch, why they'd want to have him on board. That's consistent with a move like this just a few months later.''

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: October 12, 2007 18:10 EDT