Turmoil at Citigroup Fuels Speculation of Breakup

While Citigroup searches for a new CEO,there is growing speculation that the troubled financial services conglomerate may finally be broken up.

One scenario being discussed would involve the spinning off of the investment bank and possible sale of the brokerage operations, unraveling the financial supermarket that was put together by former Chairman and CEO Sandy Weill.

Oliver Quillia for cnbc.com

Citi executives say any decision on a breakup is up to the board and the current chairman, Robert Rubin, and no one knows how they're leaning.

Still, under this scenario, John Thain, the current CEO of the New York Stock Exchange, would be brought in the run Citigroup's commercial bank and possibly asset management, while Vikram Pandit, a senior Citigroup official and current head of the investment banking unit, would continue to run that operation after it is spun off.

Pandit, a former long-time Morgan Stanley executive who was thought to be groomed for the top Citigroup job, has told insiders he will leave the firm if Thain is named CEO to replace Chuck Pince, who was recently forced to step down.

But if the investment banking unit is spun off under this scenario, the hope is that Pandit would stay.

Meanwhile, Citigroup might sell off the brokerage unit to JP Morgan Chase, which is run by a another Citi alumn, Jamie Dimon, who believes the financial services comglomerate works.

JP Morgan has all the same pieces as Citigroup--an investment bank, and a commericial bank--but does not yet have a brokerage business that sells securities to small investors.

Dimon is said to want to add a brokerage unit to the mix at JP Morgan; his father was a former stock broker who once worked for Sandy Weill.

Citigroup announced Tuesday that it overhauled the structure of its investment bank, combining equity and debt capital markets activities.