NEW YORK -- Citigroup Inc stock surged as much as 8.4% on Tuesday after a prominent fund manager said the bank's shares were underpriced.
In an interview with Fortune, Fairholme fund manager Bruce Berkowitz argued that Citigroup's balance sheet is improving, the bank is well capitalized, and the stock is trading at a lower valuation than many of its peers.
"The price is right," Mr. Berkowitz told Fortune. "It's just a question of when it becomes obvious to everyone that the worst is over."
Mr. Berkowitz manages US$11-billion at Fairholme, Fortune said. Morningstar recently named Fairholme a top fund manager over the last decade, the magazine reported.
Separately, the U.S. government is considering shedding its 7.7 billion Citigroup shares over the next few months, according to Fox Business Network's Charlie Gasparino. Previously, investors thought the United States would look to sell over the course of the year.
Jon Diat, a spokesman for Citigroup, declined to comment, as did a U.S. Treasury spokeswoman.
The U.S. government is eligible to start selling its stake of about 27% in the bank later this month.
Citigroup shares rose 27 US cents, or 7.6%, to US$3.83 at mid-afternoon after trading as high as US$3.86. The stock is trading well above the US$3.25 level at which the U.S. government bought the shares.
Citigroup options traded actively as well, with overall volume of about 1.28 million contracts four times greater than usual at mid-afternoon, according to option analytics firm Trade Alert.
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