Citigroup Inc , which needed $45 billion in U.S. government handouts to survive the financial crisis, is about to paper over a visible remnant of its near-failure: its single-digit share price.

Shares of Citigroup, the third-largest U.S. bank by assets, will start trading on Monday at around $45 each for the first time since October 2007, as a result of a 1-for-10 reverse split. The shares changed hands at $4.52 on Friday afternoon.

The maneuver will let Citigroup start paying shareholders a nominal dividend -- with its regulator's blessing.

The Federal Reserve in March allowed several large U.S. banks to boost payouts but rejected some, including one by Bank of America Corp .

Chief Executive Vikram Pandit wants to get the New York-based bank's shares back in the hands of institutional investors, who are sometimes prohibited from buying stocks priced below $5 or $10 per share.

Yet while getting rid of a sub-$5 share price may look good on its face, investors and industry experts are less than impressed with the means by which Citigroup chose to do it.

It's sort of a quick fix, said James Rosenfeld, a finance professor at Emory University's Goizueta Business School in Atlanta. (It) tells me that they're not confident they can grow themselves out of that $4 range.

Rosenfeld co-wrote a 2008 study with April Klein, a professor at New York University's Stern School of Business, concluding that companies that conduct reverse splits often suffer poor market and operating performance.

Like many rivals, Citigroup is struggling to boost revenue. A volatile trading environment has depressed investment banking profit and an uncertain economy is shrinking consumer lending.

Those problems will not be solved on Monday.

GOING TO REHAB

Investors see reverse splits as purely cosmetic, and often do not reward the companies that undertake them.

Shares of the insurer American International Group Inc , a recipient of $182 billion of federal bailouts, fell in 2009 after a 1-for-20 reverse split.

Citigroup's own shares fell on the March day the bank announced its own reverse split, and Rosenfeld predicted they would fall again on Monday.

Klein and Rosenfeld this month said Citigroup is slightly different than most companies they studied, which often traded near $1 per share and used reverse splits to avoid delistings.

Citigroup's share price fell as low as 97 cents in March 2009. It has ranged from $3.53 to $5.15 over the last year.

Shares outstanding ballooned during the financial crisis, as the government rescued Citigroup three times and then started selling off its resulting one-third common share stake. The U.S. Treasury finished that process in December.

Now with 29 billion shares outstanding, the bank would be unlikely to win regulatory approval for even a token dividend.

The reverse split would reduce the share count to 2.9 billion. Citigroup could then start paying a quarterly dividend of 1 cent a share, equal to about $116 million a year. Absent a reverse split, the minimum payout would be 10 times that sum.

Citigroup posted a $10.6 billion profit in 2010, its first year in the black since 2007.

They're trying to rehabilitate their image with the investing public, said Peter Sorrentino, a portfolio manager for Huntington Asset Advisors Inc in Cincinnati.

Citigroup is a large, once-upon-a-time marquee name in financial services, he added. They may be a little bit more sensitive to that (low share price), given that most of their peers are not in that category.

CHANGING INVESTOR BASE

Because Citigroup is the most actively traded U.S. stock, the reverse split could affect volume at exchanges operated by NYSE Euronext and Nasdaq OMX Group Inc .

It will also hurt day traders and retail investors, who will now need more resources to trade a higher-priced stock.

Citigroup shares are still relatively cheap compared with those of rivals, according to Timothy Ghriskey, co-founder of Solaris Group, which oversees $2 billion and owns the bank's shares.

The shares trade at about 0.95 times tangible book value, slightly above the level for Bank of America. But other large banks trade at an average of 1.51 times ratio, Ghriskey said.

It's a bad thing for day traders, but a good thing for long-term stockholders and therefore for the company, Ghriskey said. This will put it in stronger hands and at least somewhat longer-term investor hands, and provide some stability.

(Editing by Steve Orlofsky)