The US government will probably be able to sell its stake in Citigroup without disturbing the market too much, Dick Bove, banking analyst at Rochdale Securities, told CNBC Monday.
Mark Lennihan
Citigroup
Bove changed his recommendation for the stock to a "buy," saying the sale of the Treasury Department's stake was already priced in.
Until now, Bove had advised investors to wait for the unwinding of the government's 7.7 billion shares before buying the stock.
"I think the mathematics work out that (the government) probably can get rid of the stock without shaking the market too much," Bove told "Squawk Box."
According to traders, around 800 million shares change hands each day, so the government could sell about 8 to10 percent of its shares each day, he explained, adding: "by September or October they should be out of the position."
Even though Citigroup is likely to lose money over the next two quarters, investors should watch the bank's fundamentals, which are good, and should start buying it now, Bove said.
"Up until my customers started banging on me a couple of weeks ago, I was saying wait until the government get out of the stock," he said, explaining his changing of view over the best time to buy the bank's stock.
"But they kept saying that this thing is so well known that it's in the price of the stock, that it will be possible to get rid of the stock over a long period without shaking the market," Bove added.
He upgraded his stock price target for Citi as well, from $7 on March 10 to $8.50 and reiterated his opinion that the part of the bank that will survive after a restructuring process has earning power of 70 cents a share.
CNBC has learned that Morgan Stanley has won a hotly-contested competition among Wall Street investment banks to be the underwriter and advisor on the sale of the U.S. government’s stake in Citigroup, one of the biggest stock sales in history.