Prince Alwaleed bin Talal, a big investor in Citigroup , urged the U.S. government to sell its stake in the bank as soon as this year to boost investor confidence, Emerging Markets magazine reported.

The earlier the U.S. government exits its investments in those companies, the better, as long as the withdrawal is not done in a way that hurts the prices of U.S. banking stocks, the Saudi billionaire was quoted as saying in an interview published on Sunday.

We need to give confidence back to the shareholders and investors that these companies are moving along without government support.

A series of bailouts during the financial crisis has left the U.S. government with a 34 percent stake in Citigroup, after the bank obtained $45 billion from the government's Troubled Asset Relief Program.

Sources told Reuters last month that Citigroup was talking to U.S. officials about how the government should shed its 7.7 billion shares in the bank.

Alwaleed, who owns part of Citigroup through his investment firm Kingdom Holding Co <4280.SE>, has said little in recent months about the stake. Kingdom owned 3.6 percent of the bank in July 2007 and five months later Alwaleed said he was among investors who agreed to put more money into the bank.


Citigroup is expected to return to the black on an operating basis next year at the earliest, Alwaleed was quoted as saying in the interview.

Citigroup has learned a huge lesson. The worst is behind them right now, Alwaleed said, adding that the bank's $100 billion of tangible common equity, the highest in the industry, and the large scope of its operations meant its future was very bright.

The bank has been profitable on a net basis in each of the last two quarters because of one-time gains and accounting items, but has not posted a quarterly profit from its main operations since 2007.

In the wake of the financial crisis, U.S. regulators have been discussing the problem of banks becoming too big too fail -- since the collapse of a big institution could undermine the entire banking system, governments can find themselves forced to spend huge sums supporting debt-ridden and unprofitable banks.

But Alwaleed said the solution to this problem was not breaking up big banks, and that he did not expect the U.S. government to decide to do this.

Any failure of a broken-up bank is still going to impact the whole system. You need to fix the problem, not a symptom of the problem, he was quoted as saying.

(Reporting by Andrew Torchia)