(Adds details, share movement, Sandler O'Neill price target change)
Aug 24 (Reuters) - Fox-Pitt Kelton expects Citigroup Inc (C.N) to face another $44 billion in loan losses over the next 18 months, but said the embattled bank's capital is now strong following the "painfully dilutive" preferred conversion.
Citi received $45 billion of bailout money from the U.S. Treasury's Troubled Asset Relief Program, or TARP, and the government now owns a 34 percent stake in the company.
"We are not modelling in write-downs in problem securities, given recent stability in prices," analyst David Trone wrote in a note to clients.
Citi's large exposure to problem securities could once again be a threat, should the global economy dip again, the analyst said, adding that loan losses could end up closer to $68 billion.
However, Trone, who has a "hold" rating and a price target of $4 on the stock, said long-term value investors have shown a willingness to look beyond the forthcoming losses on legacy loans.
Separately, Sandler O'Neill raised its price target on the stock to $5.50 from $4 and said fundamental underperformance has primarily been driven by losses on "troubled assets," which have largely run their course.
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.
Shares of the bank were trading up 6 percent at $4.97 Monday morning on the New York Stock Exchange. (Reporting by Abhinav Sharma in Bangalore; Editing by Deepak Kannan, Anne Pallivathuckal)