Citigroup Inc's and Bank of America Corp's shares rose Monday on hopes that the two banks will post the same sort of first-quarter profits that Wells Fargo & Co forecast late last week.

Citigroup's shares rose 12.5 percent to $3.42, while Bank of America's rose 8.4 percent to $10.35, after Wells Fargo reported on Thursday that it expects to post a record $3 billion first-quarter profit, helped by large mortgage refinancing volume.

People are saying, 'maybe that means banks will be profitable again,' said James Ellman, president of hedge fund Seacliff Capital in San Francisco, which invests in financial stocks.

Many investors had sold Citigroup and Bank of America shares short in a bet they would decline. Some of those short sales must be undone when the banks' shares rise too much, which has also likely lifted the banks's shares, Ellman said.

But analysts cautioned that U.S. banks still face significant risks, including loans writedowns in areas ranging from commercial property to credit cards.

Wells' announcement may be a little unique to them. The rest of the industry is going to be in the next couple of quarters under continued stress from asset deterioration, said Peter Kovalski, portfolio manager at Alpine Woods Capital Investors in Purchase, New York.

(Reporting by Dan Wilchins and Jonathan Stempel; editing by Gunna Dickson)