Citigroup, the world’s largest bank, yesterday promoted Vikram Pandit, a former Morgan Stanley investment banker who joined just eight months ago, to be its new chief executive following the departure of Chuck Prince last month under the weight of multi-billion losses on sub-prime mortgage investments.

Sir Win Bischoff, who has been acting as chief executive since Mr Prince’s departure, will succeed Robert Rubin, the acting chairman, who will return to his previous role on the board.

The appointment represents a meterioc rise for Mr Pandit, who is 50 and was born in India. He was one of several senior executives to leave Morgan Stanley early in 2005 following a disagreement over strategy with Philip Purcell, the chief executive at the time.

Mr Pandit joined his present employer in May when Citigroup bought Old Lane, the hedge fund he set up after leaving Morgan Stanley, for $800 million.

Initially, Mr Pandit headed Citigroup’s alternative investment group but within a few months he saw his responsibilities broaden to include the much bigger investment bank as well.

Mr Prince resigned last month after massive declines in the value of sub-prime mortgage related investments contributed to a $6.4 billion third-quarter writedown - $500 million more than the bank predicted just a few days earlier – and Citigroup conceded it could need to take a further $11 billion hit this quarter.

Mr Pandit is not thought to have been Citigroup’s first choice. John Thain, chief executive of NYSE Euronext, was widely regarded as the front runner until he accepted the top job at Merrill Lynch last month following Stan O’Neal’s resignation under another multi-billion pile of sub-prime related losses.

Josef Ackerman, chief executive of Deutsche Bank, was also reported last week to have turned down the job while Henry Paulson, the US Treasury Secretary and former head of Goldman Sachs, was forced to dismiss suggestions that he would relinquish his Washington role and and join Citigroup.

Although it was the sub-prime crisis that finally forced Mr Prince’s resignation, investors had grown increasingly unhappy with him in recent months as he struggled to contain its costs, recorded flagging profits and presided over a stagnant share price.

Mr Pandit will need to address problems in Citigroup’s risk management practices to restore the confidence of staff and investors following the sub-prime losses. He will also need to reduce Citigroup’s costs and upgrade its technology systems and address calls to dismantle the financial services supermarket, which offers what critics regard as a broad, unwieldly spectrum of investment and consumer banking.

Citigroup, the world’s largest bank, yesterday promoted Vikram Pandit, a former Morgan Stanley investment banker who joined only eight months ago, to be its new chief executive after the departure of Chuck Prince last month amid multibillion-dollar losses on sub-prime mortgage investments.

Sir Win Bischoff, who has been acting as Citigroup’s chief executive since Mr Prince’s departure, will succeed Robert Rubin, the acting chairman, who will return to his previous role on the board.

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