Citigroup, the world’s biggest financial services group, has overhauled its investment banking business in a move that will give London greater prominence in its global operation.

The restructure will merge Citigroup’s debt and equity underwriting businesses and combine its stock and bond sales divisions.

Three of the five global heads appointed will be based in London: James Cowles will run the equities division, Paco Ybarra will lead fixed income, currencies and commodities, and Antonio Cacorino will be co-head of sales. Previously, Citigroup had three global heads of fixed income, two in New York and one in London. The head of equities used to be located in New York and sales was run jointly by one person in New York and another in London.

These appointments come after the promotion last week of Sir Win Bischoff, the European head of Citigroup, to act as interim group chief executive until a replacement is found for Charles Prince, who stepped down in the wake of billions of dollars of losses relating to America’s mortgage meltdown.

Citigroup employs 12,000 people in London, mostly at its investment bank, and about 22,000 in New York.

The newly combined global underwriting group will be led by Tyler Dickson, at present the head of equity capital markets, who will be based in New York. The restructured sales operation will be run by James O’Donnell, the head of global distribution for equities, and Mr Cacorino, who is the co-head of fixed income sales.

In a memo circulated to staff yesterday, Jamie Forese, the head of the trading operation, wrote: “We have decided to adopt a model that will more closely align our origination and sales functions across traditional product categories. By doing so, we will be better positioned to provide clients with the highest-quality advice, the most innovative solutions and the best execution.”

Meanwhile, the credit crunch continued to stake out new ground yesterday as Merrill Lynch took out a full-page advertisement in The New York Times to reassure the market that it was on top of its game despite “a challenging few months”. The world’s biggest brokerage, which took an $8.4 billion (£4 billion) third-quarter writedown related to the credit crunch and faces up to $10 billion of further losses, sought to assure investors that “our financial position and liquidity remain strong”.

The advert struck a different tone from the usual self-congratulatory postings that investment banks place in newspapers, which typically celebrate the completion of a deal or the appointment of partners. Brad Hintz, a Sanford C. Bernstein analyst, said: “This seems odd. Taking out an ad to say that we are not in trouble is probably not the way to reduce trouble.”

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