Citigroup stock below $1 as faith erodes,' wrote Bloomberg on March 5, 2009. That headline may have come just a few days too soon.

In a memorandum sent to Citigroup's employees early last week, Vikram S Pandit, Citigroup's beleaguered chief executive, hinted that the bank may be on the mend. Pandit, who moved into the corner room in December 2007, said Citigroup was on track for its strongest quarter since late 2007.

If what Pandit is suggesting is true, namely that the bank is seeing a turnaround in its fortunes, there cannot be better news for the US' battered financial markets. After all, Citigroup is still a huge institution and if it can be put back on the rails, then there's hope for many others.

Citigroup, Pandit told employees, was financially sound, its business strong and its deposits relatively stable. How has he managed to restore some semblance of stability?

Citigroup, it appears, has been profitable through January and February when it generated $419 billion revenues from strong trading results and fatter lending margins. So good old-fashioned banking, it would seem, is doing the trick with a little help from the dealing room.

While the market cheered the news -- the Citigroup stock rose to $1.45 cents -- analysts remain sceptical because they believe Citigroup could post additional losses of $55 billion over the next one-and-a-half years.

They're not encouraged by Pandit's statement that 'over time, the markets will recognise the many strengths of Citi,' by which he seems to be signalling that Citigroup might actually be in a position to absorb further losses. Although, thanks to support from the government in the form of capital infusions, the bank is now relatively better-capitalised, revenues need to flow in consistently to soak up the additional losses.

Analysts are also possibly reluctant to trust Pandit completely at this juncture because of the Wachovia Corp episode. Citigroup had bid for the bank only to be pipped at the post by Wells Fargo. It later turned out that the deal might not have been as good for Citigroup as it had been originally envisaged. Also, Pandit did take his time before selling off Smith Barney, the wealth business; had he been quicker, he could have focussed his attention on the core banking business much earlier.

In all fairness though, it's been a tough year for the 50-year-old Pandit who, for the better part of career, has been a low-profile investment banker. He had, after all, never run a public company, let alone one as big and complex as Citibank.

Chuck Prince handed over the reins to him along with $18 billion of assets to be written down. Suddenly, the company's diversified model, masterminded by Sanford Weill, was coming apart.