Citi's split personality

Citi CEO Pandit will apparently run Citicorp, leaving Citi Holdings to be run by someone else.

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NEW YORK (Fortune) -- Citigroup made two big announcements Friday, the first acknowledging it had an $18.7 billion loss in 2008. That makes it mind-boggling to remember that only three years ago - in 2005 - the company reported a profit of $24.6 billion. In the Fortune 500, that was second only to Exxon Mobil, which pulled down $36 billion.

But, of course, in 2005 Citi (C, Fortune 500) was still ostensibly making money on virtually everything it touched, including subprime-infected CDOs that ultimately started its drastic descent into losses.

Citi's second announcement said it would "realign" itself into two parts, to be called Citicorp and Citi Holdings and to be managed separately - but not, at this moment at least, to be officially split apart. CEO Vikram Pandit, it appears, is to run Citicorp, with someone else to take over Citi Holdings.

This new structure recalls what Pandit said last spring about the Citi businesses he wanted to keep and those he could do without. (See "Can Anyone Manage Citigroup?"). The keepers, he said, would be credit cards, wealth management, the corporate bank and the investment bank.

Well, today's announcement puts three of those horses - credit cards, wealth management and the investment bank - clearly in Citicorp. One part of wealth management, the private bank, ends up there, too.

But a core part of wealth management, Smith Barney - or at least roughly half of it - goes into Citi Holdings. We say "half," of course, because Citi announced earlier this week that it and Morgan Stanley (MS, Fortune 500) would form a joint venture that would merge the brokerage operations of the two firms.

Morgan Stanley will own 51% of the joint venture and therefore control it. What is to now reside in Citi Holdings is the 49% of the joint venture (unwieldy name: Morgan Stanley Smith Barney) that Citigroup will own.

The other denizens of Citi Holdings are to include various consumer businesses that Pandit has never shown interest in retaining, such as insurer Primerica. Press reports have said that Primerica will be sold, but it's basically been on the market for a year and hasn't moved. Another loss-ridden company, American International Group (AIG, Fortune 500), is trying to sell a large number of insurance companies and, in today's credit environment, they are stuck right where they are, on AIG's balance sheet.

Citi Holdings is also to inherit the $300 billion of toxic assets on which the U.S. government is sharing losses. That's a package that Pandit will surely be thrilled to shed management responsibility for.

With the noxious goods it's taking over, Citi Holdings will have assets of about $850 billion. Citicorp will have the remainder, $1.1 trillion. Pandit says he'd like to squeeze that latter amount down to $700 billion, as the company shrinks risky operations like proprietary trading.

Under the new plan, Pandit is officially lightening his management burden. But he's a member of the Citi board of directors, and that body still has the whole painful kit-and-kaboodle - Citicorp and Citi Holdings - to worry about.

One person who's taking a powder on that job is Robert Rubin, who has said he will leave Citi. According to a statement today by lead director Richard Parsons, there are "other anticipated departures" from the Citi board.

Parsons also felt compelled to say that the board "is committed to strong, independent corporate governance at all times, but especially in the challenging conditions we face today." Looking back over Citi's history, most shareholders will probably not find those words all that reassuring.