Citicorp's shares eased Thursday after gaining sharply earlier in the week in response to upgraded investment ratings from bank analysts.

The stock rose $2 in the first three days of the week. In fact, Citicorp shares have moved up 30% since early October, recovering from a low point when investors were startled by the sudden departure of the bank's president, Richard Braddock.

Bank analyst Carole Berger of C.J. Lawrence Inc. raised her rating to hold from sell on Wednesday.

Possible Gains Seen

She cited "trading momentum" in the stock and said Citicorp may benefit from lower consumer-loan chargeoffs if the nation's job picture improves.

The upgrading helped the stock jump $1 Wednesday. At the close Thursday, the shares were off 37.5 cents, to $18.50.

The stock was upgraded on Oct. 30 to hold from sell by analysts Brent B. Erensel and Michael L. Mayo of UBS Securities Inc.

Analyst Lawrence W. Cohn of PaineWebber Inc. raised Citicorp to attractive from neutral on Oct. 16.

Citicorp has now regained a large portion of the ground it lost after it announced in August the sale of $650 million of convertible preferred stock. The stock then traded at $20.

Recovery from Bottom

The shares actually peaked at $21.75 on July 2 before Citicorp had to revise downward its second-quarter earnings. It hit a low of $8.50 last Dec. 20, just before the Fed unveiled a major cut in interest rates.

The UBS move was based on "impressive-cost cutting and a serious attempt to address credit-quality problems" and noted that capital levels at Citicorp -- a sticking point for many investors -- are improving.

Mr. Erensel and Mr. Mayo at UBS carefully tempered their remarks about Citicorp, saying the bank "has tremendous potential, but there are risks to consider."

Most major real estate problems "are probably behind Citicorp," the UBS analysts said. As of Sept. 30, about one-third of its $22 billion real estate portfolio had been "recognized as problematic," they said, adding that $2.8 billion, or 13% of the real estate portfolio, has been written off or charged down since 1990.

Worst May Be Over

A reasonable scenario suggests writedowns of 20% and nonperformers in real estate hitting 50%, they said, "which means most of the pain and deterioration are over."

They added they "would be even more positive" on its stock except for concerns "about the speed with which nonperforming assets can decline and prospect for competitive or political pressure on credit card returns."

While cost-cutting is to be applauded, revenue growth is still sluggish, they noted. And capital levels remain anemic even after the sale of preferred stock and account is taken of substantial unrealized balance-sheet items.

Mr. Cohn thinks Citicorp "is on the verge of a significant breakout in profitability" with enormous leverage to raise earnings when asset quality turns the corner. He expects quality to show improvement next year and get much better in 1994.

Problems Remaining

But Mr. Cohn emphasized that Citicorp still faces several challenges. It remains "significantly underreserved" for loan losses -- reserves were about 38% of nonperformers on Sept. 30.

In addition, he said, "the company is one of the few large banks that does not meet the new regulatory definitions of |well capitalized.'" As a result, he expects the bank "to further dilute shareholders with an equity offering sometime next year."

A Citicorp spokesman said Thursday that the company's recent offering of convertible preferred stock was so successful that it may be able to meet its capital goals through retained earnings and asset sales. The company recently announced a plan to sell about an 18% stake in its student loan business to the public.

In recognition of the uncertain outlook for Citicorp, a considerable short position remains in its stock -- 5.46 million shares on Oct. 15.

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