"The earnings power of Citigroup is not being recognized in the current price of this stock," Bove wrote in a research note.

Citigroup shares rose 21 cents to $29.65 in premarket trading. Shares of Citigroup closed Monday at $29.44, 47 percent below the $55.55 price at the beginning of the year.

Bove said, despite weakening credit markets that have cost the banks billions of dollars in mortgage writedowns, Citigroup still provides value because of its geographic and product diversity. Acquisitions in Japan and investments in China should help bolster Citigroup's Asian operations, Bove said.

Bove also said he does not believe Citigroup needs to cut its dividend to retain cash and improve capital ratios. Instead, Bove recommends the banks reduce assets if it needs to bolster capital ratios.

"Citigroup will absorb its current earnings setbacks and then reconcentrate on its enormous earnings power," Bove said.

Citigroup is among the hardest-hit banks by the weakening credit markets. Citigroup wrote down the value of more than $6 billion in mortgage-related debt in the third quarter and could take as much as $11 billion in writedowns during the fourth quarter because of rising defaults on mortgages.