Citicorp stock continued its two-month advance on Monday, drawing within 75 cents of its high for the year. With earnings improving and the price relatively low, the stock is expected to push much higher next year.

The shares gained 50 cents on Monday to close at $21.

Since mid-October the stock price has soared 40%, gaining back nearly all it lost in a selloff that started in midsummer.

"Investors are starting to realize that what Citicorp said it would do, Citicorp is doing," said Bruce Herring, a portfolio manager at Fidelity Investments.

Fidelity is Citicorp's biggest shareholder, with a stake of almost 10%.

In 1990, Citicorp outlined a plan to return to profitability and increase capital.

$30 Price Predicted

"Citicorp has been aggressive in cost cutting," said Mr. Herring. "It's been able to grow the operating margin, raise capital, and - lastly - bring down the credit costs."

He said he expected the stock to sell at $30 by the end of 1993.

As of the third quarter, the bank had reduced its expenses by 13.4% since 1990, according to a report by Goldman, Sachs & Co.

During the same time, the bank has improved its operating margin - a measure of revenues versus expenses that Citicorp uses - by 60%, to $1.9 billion, the Goldman Sachs report said.

A sale of preferred convertible stock in October raised $1 billion and brought the Tier 1 capital ratio to 4.75%, said analysts.

Finally, nonperforming consumer and commercial loans have fallen as a percentage of total assets in the past three quarters. Nonetheless, Citicorp still has among the highest percentages of nonperforming loans in the industry.

Strong Progress Seen

Goldman Sachs said it was comfortable with the risks left in Citicorp's commercial real estate portfolio - a major question mark for Citicorp.

It said Citicorp was as far along in dealing with its problems in this area as First Chicago Corp. and First Interstate Bancorp, which are generally considered to be aggressively attacking their problem real estate loans.

"There's a general percept that Citicorp is returng to health," said Robert A. Torray, a money manager in Bethesda, Md. "It's not a single-digit stock anymore."

In late 1991, Citicorp shares fell as low as $8.75. While the bank's shares have not sunk to that level since, they have taken investors on a roller-coaster ride.

The stock started the year at $10.875 and reached a high of $21.375 on June 29. For the next five months, the share price steadily declined, dragged down by problems in the bank's mortgage-loan operations and the sudden resignation of Richard Braddock as president.

The stock bottomed out at $14.50 on Oct. 7. It has been inching upwards ever since.

Even at Monday's closing price, the share price is one of the lowest among the major bank stocks. It is also relatively cheap at 94.5% of book value.

Those valuations entice investors to buy. Citicorp has one of the biggest market capitalizations in the industry, which means the big mutual and pension funds can trade the shares without disrupting the market. More Citicorp shares trade on an average day than any other bank stock.

"There is still a lot of money in those big funds," said Mr. Torray. "If they are underweighted in bank stocks and they want to do some window dressing, they may take a position in a bank like Citicorp."

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