Feb. 25 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Charles Prince said last year he wanted the bank to rank No. 1 in all businesses in which it competes. Yesterday he tackled the company's lagging performance in investment banking.

Prince promoted Michael Klein to head a new banking unit and removed Robert Morse as chief of global investment banking. The firm also named Thomas Maheras to run a new capital markets unit. In the past two years, Citigroup had no role in 15 of the 20 biggest acquisitions, data compiled by Bloomberg show.

``Citigroup is seeing shops such as Goldman Sachs Group Inc. and Morgan Stanley getting business that it wants,'' said Richard Bove, a financial services analyst with Hoefer & Arnett Inc., who has a ``strong buy'' on Citigroup. ``Prince was pretty adamant that he intends to be No. 1 in every category and he will not accept excuses for being No. 2, 3, or 4.''

Citigroup's mergers team has slipped to sixth in merger work this year from fifth in 2003 and fourth in 2002, data compiled by Bloomberg show. The bank's market share of deals has climbed to 18 percent this year so far from 14 percent last year.

Goldman Sachs toppled Citigroup in 2003 from its yearlong perch as the No. 1 investment bank in collecting fees for advice and underwriting stocks and bonds.

Goldman's fees from winning the highest-paying investment banking projects rose 25 percent in 2003 to $2.5 billion, according to Freeman & Co., a New York-based consulting firm. Fees at Citigroup, the world's biggest financial services company, rose just 2.8 percent to $2.38 billion. The data did not include syndicated loans.

`Organic Growth'

``Organic growth is the No. 1 priority,'' Prince said in November, a month after he took over the company from Sanford Weill. ``No. 3 in equity is not good enough. No. 2 in M&A is not good enough. `Our goal is to be No. 1 in every product in which we choose to compete.

Klein, 40, will report to global corporate investment banking chief Robert Druskin, who became head of that business in December. The group run by Maheras, 41, will include the equities and fixed-income divisions.

Druskin did not name a new investment-banking chief to replace Morse, signaling that he and Prince aren't finished restructuring the investment banking business.

``This was not designated as a cost-cutting enterprise,'' Druskin said on a conference call. ``This change will give us better coordination. This change isn't happening because something is broken.''

Citigroup shares rose 12 cents yesterday to $49.44 in New York Stock Exchange composite trading. The stock has climbed 52 percent in the past 12 months, compared with the 37 percent gain in the Standard & Poor's 500 Index.

Morse

Morse will return to Asia as chief of the commercial lending and investment-banking unit in Asia Pacific, succeeding Stephen Long and reporting to Druskin and Deryck Maughan, head of Citigroup's international operations, said the company.

Druskin said Morse is going back to Asia because ``he knows that region and is a natural fit for us there.'' Druskin said Morse was in the region until Travelers Group Inc. acquired what was then known as Citicorp in 1998.

When Druskin was named, he became the third head of Citigroup's investment bank since September 2002, when Weill ousted Michael Carpenter and installed Prince, former general counsel, amid federal and state investigations that the bank published biased research to attract clients.

The company's profit rose 17 percent last year to $17.9 billion, helped by stock and bond trading, rising credit-card lending and fewer bad loans.

Citigroup is the top underwriter of U.S. bonds this year, arranging the sale of $29.2 billion of debt, including the $1 billion debt sale for Societe Generale on Feb. 6. The bank ranks second worldwide in arranging sales of equities and convertible bonds with $8.3 billion sold, behind Morgan Stanley's $11 billion.

To contact the reporter of this story: Eric Moskowitz in New York Emoskowitz@bloomberg.net.

Last Updated: February 25, 2004 00:09 EST