Citigroup shares gain on asset sale optimism

By Steve Eder and Joe Rauch

NEW YORK (Reuters) - Citigroup (C.N: Quote, Profile, Research) shares rose nearly 9 percent on Thursday to their highest level in more than three months, leading a wider industry charge and reflecting growing confidence the embattled bank would become more profitable as it unloads troubled assets.

Citi shares closed up 35 cents, or 8.47 percent, at $4.48 on the New York Stock Exchange. The stock has soared 56 percent during the past month, a bigger jump than any of its peers in the KBW Banks Index .

The index gained 2.87 percent on the day to reach its highest level of the year. Only three of the 24 banks in the index posted price declines for the day.

Citigroup led the way, its shares rebounding after higher-than-expected second-quarter profit and a high-level management shake-up.

Bank analyst Richard Bove, at Rochdale Securities, said some investors, gaining confidence that Citi will become more profitable as it unloads its troubled assets, are betting that Citi shares will triple in three years.

"People are buying it now in expectation of the triple because they made the decision that all of the negatives that could happen don't mean anything," Bove said.

Citi's shares are still well below their 52-week high of $23.50 in October. Citi's shares had fallen to a low of 97 cents in March on fears about its toxic investments and government intervention.

Citi's troubled assets include subprime mortgages, corporate loans, home loans, and commercial real estate mortgages, which the bank has been writing down and looking to offload.