Long-Term Investors Would Do Well to Buy Citigroup: Pro

There was a lot to like Citigroup's better-than-expected earnings report and two Wall Street analysts say the stock remains their top pick in the sector.

Both Sandler O'Neill analyst Jeffery Harte and RBC Capital Markets analyst Gerard Cassidy pointed to Citigroup's stronger-than-expected capital markets business as a positive.

"Strength in the capital markets relative to expectations was good and what stood out to me was credit quality in the North American mortgage portfolio. The delinquencies were down almost 19 percent sequentially and that's really good news for any bank with a large mortgage portfolio," Harte told CNBC's "Squawk on the Street."

Cassidy agreed, saying the capital markets business was unusually strong. "Citi put up very strong trading numbers both in fixed income and equities, which helped drive better-than-expected results," Cassidy said.

The strong capital markets activity may also bode well for earnings at Goldman Sachs and Morgan Stanley when they report later this week, Harte said.

RBC's Cassidy also pointed to continued improvement in credit quality and expense management as reason Citigroup's earnings can continue to improve.

Harte also sees improvements in credit as a positive for the banks in general. "I think there's still a lot of room for downside or improvement in charge-offs," the Sandler O'Neill analyst said. "So I think credit and especially for the money center banks will be a nice tailwind through this year and into next year, and probably more of a tailwind than people generally expect."

Harte pointed to the emerging markets business as an area of concern, however. "International consumer loans were up 1 percent sequentially," he noted. "That really seems to be slowing down."

Nonetheless, Citigroup is still his favorite name, adding, "I think if capital markets get a little better, Morgan Stanley is a good place to be long as well."

Cassidy also prefers Citigroup. "I would say this is still a value stock," the RBC analyst said. "Long-term investors would do very well in buying the stock."

By CNBC's Justin Menza. Follow him on Twitter @JustinMenza

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Citigroup is an investment banking client of Sandler O'Neill.