Fox-Pitt Kelton expects Citigroup Inc 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.

Shares of Citigroup were up more than 5 percent at $4.95 in morning trade on the New York Stock Exchange.

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 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.

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.

The analyst has a hold rating and a price target of $4 on the stock. (Reporting by Abhinav Sharma in Bangalore; Editing by Deepak Kannan)