IN THE EYES OF MANY FINANCIAL EXECUTIVES, Citigroup Chairman and CEO Chuck Prince has an enviable perch. He runs the largest financial institution in the world, encompassing the globe-girdling Citibank retail franchise, a giant commercial and investment bank and the Smith Barney brokerage operation. While other CEOs have to wonder whether their companies will survive the global consolidation in financial services, Prince does not. Citi most assuredly is a winner, along with its archrival in international markets, London-based HSBC.

Yet, for all the vaunted advantages that Citigroup's size brings, the company (ticker: C) has performed poorly in the stock market. In the past five years, its shares have declined 1%, versus gains of 62% for Bank of America, 56% for Wachovia, 46% for Wells Fargo and 47% for HSBC. Among the biggest financials, only JPMorgan Chase has done worse, with a loss of 4%. At around 48.50, Citi trades for just 10.4 times the $4.68 a share analysts expect it to earn in 2007 -- a discount both to its historical price-earnings ratio and that of the financial sector.

In part, Citigroup's stock has suffered because of the sheer difficulty of getting this huge assemblage of assets, cobbled together over almost a decade by Prince's predecessor, Sandy Weill, to function as a well-oiled machine. Then, there's the embarrassing series of regulatory run-ins Citi has had in recent years, including a private-banking scandal in Japan; charges that it manipulated the government bond market in Europe; investigations into allegedly biased stock research and, not least, a government suit it settled last year for $208 million, relating to charges it prospered at the expense of Citi mutual-fund investors by using an affiliated transfer agent.

Lately, however, signs are emerging that Citi has put its regulatory problems behind it, and is beginning to execute on the growth strategy Prince, 56, put in place after Weill tapped him as CEO in 2003. The new boss, who added "chairman" to his title in April, has streamlined the house that Sandy built, and is directing his efforts toward expanding Citi's presence overseas, particularly in emerging markets, while reenergizing its more mature consumer business at home.

Chairman and CEO Charles O. Prince is refashioning Citigroup in his own image, with an emphasis on organic growth.

Although Sallie Krawcheck, Citi's CFO and Prince's No. 2, admits the strategy is not yet "firing on all cylinders," she contends it will produce substantial growth in revenue and earnings, and lead Wall Street to view the company in a new light. Citi fans, many of whom carry stock-price targets above 60 a share, agree.

Should Citi's shares remain sluggish, however, you can bet its shareholders won't. Instead, they're likely to call for the ouster of Prince and Krawcheck, and some might even demand that the company be broken up. In the view of one breakup advocate, William Smith, manager of SAM Advisors, a small New York money manager, Citi could be carved into three discrete parts -- a U.S. retail bank, an international bank and a global investment bank -- which he estimates would trade for north of $66 a post-split share, or nearly 40% more than the company's current market value.

Citi's largest holder, Saudi Arabia's Prince Alwaleed Bin Talal Alsaud, neatly sums up investors' frustrations. "Citi has run out of excuses," he says in a telephone interview from Riyadh, deeming the company's range-bound share price "unacceptable."

And he adds: "They just have to deliver on their promise to perform."

CHUCK PRINCE, WHOSE OWN desk bears a plaque that states "No Excuses," has heard the message. A lawyer by training, who joined a Citi predecessor, Commercial Credit, in 1979, Prince has long been viewed as a behind-the-scenes guy, a characterization he rejects. Yet, his reputation belies a determination to remake the company in his own image and a mission to "drive revenue through the front door."

If Weill imagined Citigroup as a financial supermarket, selling a panoply of products under one umbrella, Prince offers a more circumscribed, but perhaps more coherent, vision. Last year, he sold what remained of the company's Travelers insurance unit, and unloaded Citi's mutual-fund operation to Legg Mason (LM), in exchange for its brokerage business.

As a result, Krawcheck says, "Our profile today is quite different from a few years back. The old notion that you could pick up financial services like lettuce, steak and dessert is a little simplistic. We have no insurance company, property/casualty business or asset management, because these businesses failed to deliver the kind of sustained earnings growth we require."

The new Citi garnered 57% of its $84 billion of revenue last year from its global consumer group, which also chipped in 53% of its $20 billion in income from continuing operations. Corporate and investment banking accounted for 29% of revenue and 34% of profits -- a reflection, in part, of the company's recent strides in international financing, transaction services and debt and equity underwriting.

Citi's global wealth-management division, including Smith Barney, the private bank and the remnants of Salomon Brothers, generated 10% of revenue and 6% of earnings in 2005. And Citigroup Alternative Investments, which manages about $39 billion of hedge-fund, private-equity and real-estate assets, contributed 4% of revenue and 7% of profits.

U.S. operations account for nearly 60% of Citi's profits, but foreign markets offer the most obvious opportunities for growth. Indeed, in this year's first quarter, the international consumer group saw an 8% increase in revenue and a 21% jump in profits, far outshining results in the U.S. consumer business. Likewise, international revenues in corporate and investment banking rose 34%, while profits shot up 80%.

While many banks talk about what they intend to do overseas, Citi has been there for decades, and in some cases more than a century. In recent years, it has profited mightily from, and arguably abetted the emergence of, a burgeoning middle class in less-developed countries. And, as Krawcheck says, the company still has "plenty of room to grow" internationally, because it has "only a small market share" in most countries.

In Mexico, which generated 10% of Citi's '05 profits, it had virtually no retail presence until its 2001 purchase of Grupo Financiero Banamex-Accival ("Banamex"). It now boasts a 24% share of retail deposits. In the past 12 months Banamex opened 2,000 kiosk-style counters in drugstores to process paychecks and take deposits, and helped make Citi the country's leading credit-card issuer.

In India, Citi is No.1 in credit cards, and in the top three in consumer finance. In Korea, where it snapped up KorAm Bank in 2004, it has introduced myriad new investment products and expanded its small-business offices to 46 from 11.

In Russia, Citi has pioneered new forms of distribution by forming a partnership with that country's postal system to establish 40,000 bank outlets in post offices. It also has established a local brokerage, which now ranks No. 6 in Russia with a 4% market share. The company also has sizable operations in China and Japan.

Citi's international expansion owes much to its years of experience in the U.S. consumer market, and to its ability to leverage longstanding corporate relationships overseas. The company is viewed as a training ground for other nations' bankers, and similarly has benefited from its relationships with those now in government service and key positions with local banks.

WHILE CITI'S INTERNATIONAL consumer business reported a 6% increase in net income last year, to $4.1 billion, the U.S. consumer business saw a 10% drop, to $7.2 billion. Domestic results were hurt by, among other things, rising interest rates, which compressed net interest margins, and a spike in bankruptcy filings associated with the passage of a harsher bankruptcy law in October. This year, bankruptcy filings are expected to decline.

In the U.S., with its well-developed financial-services business, Citi is redefining itself as a more focused purveyor of credit cards, retail-banking services, and consumer and commercial lending, and integrating its various platforms to provide a stronger link to customers. "It's important for us to demonstrate we can grow our U.S. consumer business, which hasn't shown the right kind of revenue growth yet," Prince says. "It is important for us to show we're on the right track in the next few quarters."

One promising development: the launch in March of an Internet bank, Citibank Direct, which already has attracted $4 billion in deposits.

Citi operates 4,000 retail branches in the U.S., compared with market leader Bank of America's 6,000, but shows no inclination to leapfrog its rival via a major acquisition. Instead, Prince has said that Citi will make selective purchases, adding branches "in the right way in the right places." Early last year, Citi completed the acquisition of First American Bank of Texas, adding 106 branches in a key market. In approving the deal, the Federal Reserve effectively banned Citi from making further acquisitions until it revised controls in the wake of its numerous scandals. The ban was lifted this spring.

Building bank branches takes time, but is a surer way to book profits than buying them. The average branch costs an estimated $1.8 million to build, but more than $10 million to purchase, With a new branch, however, you have to wait for earnings; an acquired one provides an instantaneous boost to the bottom line. Hence, there is pressure from Wall Street for another big acquisition.

"I can't tell you how many times you've come up to me and said, 'You need to buy a big bank,' " Prince told an audience of analysts and investors at a Sanford C. Bernstein conference last month.

He noted that a mammoth retail-branch network conceivably could become a disadvantage in the future, as the worldwide transition to Internet banking gathers speed.

CITI'S CORPORATE AND investment-banking division has seen the greatest change since Prince took control. Prior to its reorganization, CIB, as it is known, encompassed aggressive bond-trading house Salomon Brothers; the Smith Barney brokerage and a joint venture in Japan -- parts that didn't mesh.

Prince promoted several CIB executives, with the mandate that they transform Citi's banking operation, giving it a truly global reach. The company stepped up trading in derivatives and emerging-market securities, with the help of new technological platforms such as Lava Trading, an electronic-trading company that Citi bought in 2004.

Citi's transaction-services business, a key component of its banking franchise, also has undergone a major makeover. Prince regionalized the operation, directing the processing of 85% of trade, securities-service and cash-management transactions through only three processing centers -- in Tampa, Fla., India and Penang, Malaysia -- versus 80 a decade ago.

Most of the changes at Citi have stemmed from the bank's humbling self-examination following the scandals, most of which broke in 2004. But, while Prince's reorganization has produced results, the impact on profits has underwhelmed investors. Citi earned $3.26 a share in 2004 and $3.88 in 2005, missing Wall Street's numbers in several quarters. Alternately, analysts might have overestimated the company's earnings power; Krawcheck refuses to give specific guidance.

Krawcheck, 41, who joined Citi in 2002, attributes the stock's discount to concerns about rising interest rates, deteriorating credit quality and setbacks in emerging markets, which bode poorly for financial stocks in general, as well as the regulatory missteps that are Citi's alone. Investors are not "looking through" the risks to see the opportunities, she says.

Prince, who has set a goal of mid-to-high single-digit "organic revenue growth" and wants "organic income growth" to exceed it, likewise is irked by the Street's impatience, and revealed a touch of his own at last month's investment conference.

Told that some investors weren't satisfied with what he has accomplished, he replied: "I am a little surprised that people are disappointed with organic growth. It has been only 12 to 13 months, and, even as impatient as I am, I can wait longer than that."

In a recent interview, he elaborated. "We're talking about a balance between the long- and short-term interests of the company. If you're not willing to take the plan and run with it -- and possibly fail -- you shouldn't be leading."

Fortunately for Prince, he has the support of Prince Alwaleed, a famed and successful investor who snapped up shares in Citigroup predecessor Citicorp when it was on the ropes in the early 1990s. Today the Saudi prince owns 4% of the company's stock.

Recently, Chuck Prince flew to Saudi Arabia and had lunch with Alwaleed in Riyadh. The two discussed Citi's reentry into the Saudi market, via a Citi joint venture with Alwaleed to form a full-service branch operation. Prince Alwaleed says he appreciates what Citi's CEO is doing, and praised his "no excuses" approach to delivering on promised performance. "He's a very straightforward man," Alwaleed says of Prince. "He's not risk-averse, just scandal-averse."

In the meantime, Prince is taking care of Citi holders in other ways. Since he became CEO, the company has boosted its annual dividend 40%, to $1.96 a share, for a yield of 4%. Citi also has instituted the fourth-biggest share repurchase in history, authorizing a $15 billion buyback last year, and a $10 billion program this year.

THERE ARE THREE WAYS Citi can unlock shareholder value, analysts and investors say: It can grow organically, buy other banks and financial-services firms or break itself up. Prince & Co. have taken the first path in the belief it will produce the best long-term results.

Some skeptics say Citi is too big to grow organically without doing a major deal. The problem is finding one that would be accretive to earnings and mesh with the company's pursuit of organic growth.

CFO Sallie Krawcheck expects that Prince's "no excuses" policy will yield fat gains.

As for dismembering Citi, SAM Advisors' Smith is by no means the only Citi watcher who has floated the notion in recent years. He calls it "the only logical solution" in light of the company's inability to increase earnings more rapidly and lift its stock. "It's just a huge bureaucracy," he says. "The supermarket strategy failed for multiple reasons, including a heightened regulatory environment and lack of operational oversight. The operating units can be much more efficient if run on a stand-alone basis."

Smith thinks Citibank USA could sell for 13 times 2007 estimated earnings of $1.95 a share, or $25.35. Citibank Global, as he calls it, could fetch 16 times '07 estimates of $1.10, or $17.60 a share, and the investment-banking and capital-markets unit could trade for 12 times '07 estimates of $1.99 a share, or $23.88, for a total of $66.83.

The potential returns would be much higher, however, once these companies began operating independently. In a few years, Smith estimates, the shares of all three together could be worth 90.

Not surprisingly, Citi management is appalled by such an exercise. "Breaking up Citigroup is the dumbest idea I've ever heard of," says Prince, who wears cufflinks with the emblem of Citigroup progenitor First National City Bank, which traced its roots back to 1812. "You would take a franchise that people have worked almost 200 years to build, and break it up into two or three parts, only to see the parts acquired by others. The real question is: What would our competitors pay to be able to duplicate what we have?"

Alwaleed allows that while "fine-tuning the structure by shedding unprofitable pieces is acceptable," he, too, is "adamantly against the discussion of a breakup, because the strength of Citi lies in its expansive package of products and the diversification provided by its presence" in more than 100 nations.

Legendary mutual-fund manager John Neff, a longtime Citi fan and member of the Barron's Roundtable, also backs Prince's strategy, and is convinced a fickle market eventually will recognize the company's value.

"One of the joys of Citi, although it doesn't receive much recognition, is the company's ability to capitalize on its worldwide footprint to increase profits faster than revenue," says Neff, who shepherded the Vanguard Windsor Fund for more than 30 years. "If you busted it up, you'd run the risk of losing that."

His forecast: "Eventually, the market will give in, particularly when you're in there buying, too. At some point, you sop up the disillusioned holders. The current market is such a captive of momentum. You just have to hold tight and wait out a marketplace that's not too bright."

When it wises up to Prince's agenda and Citigroup's growth potential, look for the shares to head to 60.