The board unanimously elected Michael Corbat, manager of the bank's business in Europe, the Middle East and Africa, to succeed Pandit as CEO and a director on the board, the bank said.

The unexpected swift change at the helm of the nation's third-largest bank came a day after Citi reported an 88 percent drop in earnings for its third quarter.

The New York-based bank has lagged other major US rivals such as JPMorgan Chase and Bank of America in recovering from the 2008 Wall Street crash.

Pandit, who steered Citigroup through the crisis, said the bank had emerged as a strong institution.

"Given the progress we have made in the last few years, I have concluded that now is the right time for someone else to take the helm at Citigroup," he said in a statement.

"I could not be leaving the company in better hands," he said, calling Corbat the "right person" to succeed him, with a 29-year record of achievement and leadership at the company.

Corbat said Citigroup's fundamentals were solid and the bank was on the right path.

"With unprecedented economic, regulatory and political change, my top priority is to keep us focused on what our clients need, both today and tomorrow," he said.

The bank's president and chief operating officer, John Havens, who also served as CEO of the bank's Institutional Clients Group, also resigned.

Havens said he had planned to retire at year-end but decided to leave the company in light of Pandit's resignation, the company said.

On Monday, Citigroup reported an 88 percent drop in quarterly earnings, hit by heavy one-time charges.

Citi shares gained 0.6 percent in opening trade Tuesday following the surprise Pandit announcement.

Jon Ogg, an analyst at 24/7WallSt.com, noted that normally Pandit would have been expected to at least remain on the board for a transition period.

"The 'immediate' nature may create some worries for those looking from outside the fish bowl. This is a change that just feels like it does not add up as far as the manner in which it is happening," Ogg said.