Citigroup shares rise as Pandit touts 'profit' in 2009

Washington, March 10 (IANS) Vikram Pandit, the Indian American chief executive of Citigroup Inc, Tuesday said the ailing banking giant was profitable during the first two months of the year and called its capital position 'strong' in remarks leading to a rise in the stock price.

'Our stock price is not an indication of our financial strength,' Pandit said in a memo to employees acknowledging concern about the price of Citigroup's shares that have been under constant pressure over the last week.

The shares were trading right around the $1 mark most of time after having fallen under $1 for the first time ever last week. The market reacted swiftly to Pandit's upbeat assessment and sent the shares of the company soaring by more than 25 percent in early trading Tuesday.

Pandit also said Citigroup is enjoying the best quarter-to-date performance since the third quarter of 2007. All told, the company has lost more than $37 billion over the last five quarters.

'Our pro forma tangible common book value would be $3.82 a share assuming maximum preferred conversion... and the pending conversion is creating a large technical short in our stock that should be lifted once the conversion is completed,' Pandit wrote.

Late last month, the bank unveiled a plan with the US government and select institutional holders to convert some of its preferred shares into common stock, boosting the government's direct ownership in what was once the largest US bank to 36 percent.

The preferred exchange is expected to make Citigroup the strongest-capitalised large US bank as measured by tangible common equity and Tier 1 ratios, Pandit added.

'In January and February alone, our revenues excluding externally disclosed marks, were $19 billion. During 2008, our full quarterly average for these revenues as adjusted was $21 billion,' Pandit said in the memo, which was also filed with the Securities and Exchange Commission.

'That said, we are still one month away from the end of the quarter, and market volatility could alter results.'

Pandit also reassured investors that the management believes Citigroup can earn enough taxable income in coming years to realise most of its deferred tax assists, currently valued at about $44 billion.

In a related development, The Wall Street Journal reported Tuesday that Citigroup executives and US federal officials were in talks to make sure that there is a contingency plan in place should conditions take another turn for the worse at the bank.