Vikram Pandit yesterday agreed to take on what is possibly the most demanding financial services job in the world as he accepted the role of chief executive at Citigroup.

The fact that NYSE Euronext’s John Thain, the initial frontrunner for the Citigroup job, instead opted last month to run Merrill Lynch, a similar but far smaller operation, with manifold problems of its own, underlines the sheer scale of the task.

Mr Pandit’s first job will be to restore confidence among staff, to avoid too many defections of the best staff to rival banks, and investors, who have kept its shares down in recent years in the face of concerns about the financial supermarket’s billowing cost-base and its lack of focus.

Initially, he will need to address the bank’s risk controls as he seeks to ensure that the enormous subprime-related investment losses – which contributed to a $6.4 billion writedown in the third quarter and threaten up to $11 billion of further losses this quarter – will not be repeated.

He can then address the more fundamental concerns that key investors have been raising for several years.

Mr Pandit will need to decide whether to break up Citigroup into separate consumer and investment banking operations, or to persevere with its across-the-board supermarket model.

This was intended to provide multiple services to the same client and enable Citigroup to build a massive balance sheet that would help it weather market jolts such as the credit crunch. Instead, the bank has become unwieldly and unfocussed.

Mr Pandit will also need to restructure the bank to cut costs and make it more efficient. Citigroup is in the early stages of a major redundancy programme which is expected to result in the loss of up to 45, 000 jobs, or more than 10 per cent of the workforce.

Mr Pandit will be in charge of the restructuring programme and will need to think carefully about where those cuts should fall.

The simultaneous appointment yesterday of Sir Win Bischoff as chairman is both a curse and a blessing for Mr Pandit. It underlines the idea that Mr Pandit lacks the experience to fill both the chairman and chief executive roles held by his predecessor, Chuck Prince.

He has only been at the bank for eight months and has never run a public company, let alone one as big and unwieldly as Citigroup.

But Mr Pandit will need some guidance and having Sir Win at his side should prove an enormous help. This 60-year old banking veteran knows Citigroup well from his most recent role heading the bank’s European business. And he served as the chairman of Schroders before Citigroup bought the firm in 2000.

Mr Pandit’s first few months are likely to prove particularly tough. Even with a recent $7.5 billion cash injection from Abu Dhabi, Citigroup’s subprime losses are so huge that analysts predict it will have insufficient capital to maintain its dividend and will cut it considerably. The shareholders won’t like that.

To make matters worse, analysts believe that even Citigroup’s most pessimistic forecasts about impending investment losses could easily be a few billion dollars short of the mark.

On second thoughts, its definitely the most challenging job in financial services.

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