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Citigroup Inc. (C) Chief Executive Vikram Pandit has said for some months that Citi has turned the corner; now Wall Street finally seems to agree.

On Wednesday, Citi's stock closed above $5 for the first time since Aug. 28, 2009, a psychological milestone. On Thursday afternoon, it was trading at $5.05, down 0.6%.

The $5 threshold has lost some of its financial significance for stocks during the financial crisis. It used to be a barrier for mutual funds, which often couldn't invest in stocks that trade below $5, but those policies were largely dropped during the financial crisis, said JMP Securities analyst David Trone.

Still, for Citi, finally achieving stock price perch at $5 demonstrates Wall Street's recognition of the bank's return to profitability last year, and the departure of the Treasury Department as a Citi common shareholder.

"Pandit has done a remarkable job in making the company more transparent... cleaning up problem assets and positioning the company to take advantage of global growth opportunities," Frank J. Barkocy, director of research at Mendon Capital Advisors, said. He is "getting at least some of the recognition he deserves."

But Citi continues to face considerable challenges in terms of financial goals and market capitalization. On Sept. 30, Citi's book value, a benchmark for stock prices that reflects assets minus liabilities, was $5.60 per share. (Book value excluding intangible assets like goodwill was $4.44.)

Arch-rival J.P. Morgan Chase & Co. (JPM) traded at $44.40 on Thursday, almost 5% above book value of $42.29. But Citi isn't the only ugly duckling anymore: Bank of America Corp. (BAC), the nation's largest bank by assets and deposits, traded at $14.78, about 30% below book value of $21.17. It struggles with concerns about the regulatory impact on its U.S. consumer business and soured mortgages it sold to private investors that it might have to take back.

Citigroup still has to reinstate its dividend, and that's likely to be later than its peers. Unlike J.P. Morgan, Citi isn't expected to restore its dividend until 2012. And for some investors, dividends are critical.

Furthermore, it's continuing to divest a big chunk of businesses management believes don't fit with its narrower banking focus. For example, its consumer lending business, recently renamed OneMain Financial, is expected to be sold this year. Another big unit is Citi's operation that issues credit cards for retailers like Sears Holdings Corp. (SHLD) and Macy's Inc. (M). That card business is part of Citi Holdings, the segment that Pandit wants to liquidate.

"The next leg up in the shares will occur when investors gain more visibility with the required capital levels and signs regulators are comfortable with the company growing once again," said Todd Hagerman, an analyst with Collins Stewart LLC.

"Absent a near-term return to growth and redeployment of excess capital, the valuation is once again looking relatively full," he said.

Other analysts beg to differ. Barkocy said Citi "shares still offer among the best values of the money-center banks," and Raymond James & Associates analyst Anthony Polini said he expects Citi to hit $6.50 by the end of this year.

Citi is scheduled to report fourth-quarter earnings on Tuesday and, on average, analyst expect the company to report a profit of 8 cents per share, compared to a 33-cent loss a year earlier. "We expect [fourth quarter] results to be highlighted by improving credit quality, growth from emerging markets, and a lower level of losses and increased asset sales at Citi Holdings," Polini wrote in a research note Thursday.

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com

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