The tough road to find a Citi chief

Citigroup struggled to find a qualified candidate for CEO.

NEW YORK (Fortune) -- The fact that Vikram Pandit got the biggest gig in banking - the CEO job at Citigroup (Charts, Fortune 500) - says a lot about the allure of the job. Before Pandit accepted the position on Tuesday, Citi's board of directors apparently asked at least three other financial chiefs, all more renowned and experienced than Pandit, to consider the position. They all said they weren't interested.

The first man approached, according to sources close to the Citi search, was the just-retired Wells Fargo (Charts, Fortune 500) CEO Dick Kovacevich. A banker at Citi until 1986, he went on to build Wells Fargo into a top-performing bank - without the kinds of multibillion loan losses that have sunk bigger giants such as Citi. American Express CEO Ken Chenault is also known to have turned down Citi's overture. So reportedly did Deutsche Bank's boss, Josef Ackermann.

As the board's hottest prospects - guys who know how to run publicly held financial companies - took themselves out of the running, Citi's search committee was undecided as late as this past weekend. One man the directors were still considering: Mike Neal, a vice chairman at General Electric (Charts, Fortune 500) who heads the commercial finance unit there. Given that his business sells loans, leases and other financial services to GE customers, his purview lacks the breadth required for the top job at Citi. He would not have been the ideal fit.

Then again, few could argue that Pandit is the perfect fit either, given that he is new to retail banking. Born in India, Pandit, now 50 years old, spent most of his career at Morgan Stanley (Charts, Fortune 500), where he headed the global equities business and later was president and chief operating officer of the firm's institutional securities and investment banking group. He left in early 2005, along with other executives who clashed with then-CEO Phil Purcell, whom the Morgan Stanley board forced out that summer.

Pandit soon launched a hedge fund, Old Lane Partners, which Citi bought this spring for a price believed to exceed $800 million. Now Pandit must show that he measures up to that steep price and the board's bold decision. It's a high bar particularly given Citi's multitude of problems: large loan losses, out-of-whack expenses, and continuing management turmoil.

Moreover, Citi's global consumer businesses, which clearly are beyond Pandit's proven expertise, provide more than half of the company's total profits: $12.1 billion of its $21.5 billion in net income last year.

Meanwhile, the newly appointed chairman of Citigroup is Sir Win Bischoff, who chaired Schroders investment bank in London before Citi acquired it. Bischoff, 66, lacks retail banking cred, too. During Citi's conference call following its announcement, director Robert Rubin, who was interim chairman during the search, was asked why the company has no retail bankers at the very top. "We thought about this," Rubin replied. "We decided to do this on a best athlete basis."

So the pressure is certainly on Pandit. But Rubin, who was paid $17 million last year to advise his failed CEO predecessor, Chuck Prince, now has plenty to prove too.