After Pandit, a Smaller Citi Could Get Smaller Yet The incredible shrinking bank may have to shrink more. In the hours after Tuesday's surprise announcement that Citigroup CEO Vikram Pandit was stepping down, speculation was rife, and facts scant, about what lay ahead for the nation's third-largest bank. But one possibility given high odds by financial analysts: More cost-cutting, more shrinking and more focus on boring, traditional banking, like making loans. "It's going to get a lot smaller," said Gerard Cassidy, a long-time banking analyst at RBC Capital Markets. You've got to shrink to make big money. In the nearly five years since Pandit took over as CEO, he shed businesses and cut jobs. Staff fell from 375,000 when he took over to 262,000. Once the nation's largest bank, Citi is now the third-largest, with $1.9 trillion in assets. It trails JPMorgan Chase, with $2.3 trillion, and Bank of America, with $2.1 trillion. Citi's new CEO is Michael Corbat, 52. He had been the CEO of Citigroup's Europe, Middle East and Africa division. He also ran Citi Holdings, which contains assets that Citi wants to sell. Because Corbat isn't widely known, analysts Tuesday were not sure how he might change the direction of the company. For clues, some are looking to someone more well-known: the man thought to be behind Pandit's departure, Citi Chairman Michael O'Neill. O'Neill became chairman in March, when Richard Parsons left after three years. This undated photo provided by Citigroup shows Michael Corbat, the new Chief Executive Officer of Citigroup. Citigroup announced on Tuesday, Oct. 16, 2012, that Michael Corbat will be the latest to run the bank that got its first big break by helping the U.S. cover debts after the War of 1812. (AP Photo/Citigroup) Close O'Neill was elected CEO of Barclays, the British bank, in 1999 but had to give up the job immediately because of heart problems. He joined Citi's board in March 2009. O'Neill had also been CEO of Bank of Hawaii Corp., where he was a big cost-cutter. When he ran Bank of Hawaii, he shut down up to 50 percent of its branches. It's a startling number," said Cassidy. He added that at Citi, "if the branch banking businesses doesn't make sense in parts of the United States, (he'll) get rid of it." Tom Brown, founder of hedge fund Second Curve Capital, agreed. "O'Neill downsized tremendously, and that's what I think you'll see here," he said. For years, the goal in banking was to get bigger, spreading expenses over more and more customers and offering a smorgasbord of services. This was the vision of Sandy Weill, the former Citi CEO who built the bank through several deals. But the appeal of the one-stop shop, though not dead, has lost its luster since the financial crisis. Many banks, Citi included, were so sprawling, they didn't even know the risks they had assumed. As the housing market imploded, Citi lost $32 billion in 2008, according to FactSet, a financial data provider. Nearing collapse, the bank took $45 billion in government money. The government converted $25 billion into an ownership stake, which it sold in December 2010 for a $12 million profit. Citigroup had repaid the other $20 billion in December 2009. In a conference call with analysts late Tuesday, O'Neill gave few details about how the bank may change after Pandit. But he did note that it will be "extraordinarily focused on our expense level." Some analysts speculated the bank may place less emphasis on Wall Street trading and helping companies sell stocks and bonds to the public, the so-called investment banking in which Pandit had expertise. The business is volatile, with blockbuster profits occasionally followed by big losses.