Editor's Note: The Street ran an article called Five Reasons to Love Bank Stocks on May 28, highlighting the future benefit of past tax losses as a reason to invest in bank stocks. Bill Ackman is voicing a similar opinion in the article that follows.

NEW YORK ( TheStreet) -- Citigroup ( C) shares got a boost Wednesday as a bullish letter to investors from hedge fund giant Bill Ackman made the rounds among investors.

Ackman, head of hedge fund Pershing Square Capital Management, announced at a recent investor conference that he had bought roughly 150 million shares of Citigroup, but did not explain the reason for his investment in detail. In his letter to investors that surfaced Wednesday, Ackman cites "two important elements of Citi that the market does not fully appreciate" and puts the investment at 146.5 million shares.

Pershing Square officials declined comment for this article.

>>>See Ackman's Letter

The first point Ackman makes is that Citigroup effectively has $21 billion in net deferred taxes on its balance sheet. In other words, Citigroup lost so much money in the past that it likely won't be paying taxes for several years. As TheStreet pointed out in a recent article, Citigroup will not pay taxes on its next $131 billion in earnings. It is expected to earn $8 billion in 2010. Other banks, including Bank of America ( BAC) and Morgan Stanley ( MS), will see similar benefits, though not so dramatic.

Ackman also states that Citigroup has "$24 billion to $30 billion of excess capital supporting the wind-down of Citi Holdings that will be available to be returned to shareholders as these assets are liquidated."

Ackman also sounds bullish on big banks in general in his letter, calling it "a favorable moment in history to be a large scale financial institution." He cites "the combination of extremely low-cost funds and deposits, relatively high spreads on new loans, more conservative lending standards, and a less competitive lending environment."
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Citigroup shares were up more than 3% for most of the day, while other large banks including JPMorgan Chase ( JPM), Wells Fargo ( WFC) and Bank of America were all lower. Citigroup finished the session at $3.87, up 4%.

Volume of 1.14 billion was well above the stock's trailing three-month daily average of 855.3 million, and once again good for most active issue on the New York Stock Exchange.

Citigroup shares have pulled back considerably since mid-April when the big banks reported strong quarterly results but eventually flagged as the drumbeat for financial reform grew louder with Goldman Sachs ( GS) getting hit with civil fraud charges by the Securities and Exchange Commission. Since then, U.S. equities in general have been sagged and been more volatile because of Europe's debt problems and a fuzzy domestic employment picture.

So far in 2010, Citigroup shares are still up 12% but they were up more than 50% in 2010 at one point.

Ackman gained fame for profiting handsomely from shorting bond insurer MBIA ( MBI) and for taking a big equity stake in shopping mall owner General Growth Properties ( GGP) for pennies on the dollar after it had filed for bankruptcy protection. The shares are now worth more than $13.

Ackman's positive stance is in line with recent bullish comments from Rochdale Securities analyst Richard Bove, who characterized the stock as "seriously undervalued" earlier this month, and Oppenheimer analysts who boosted their rating on the shares to outperform on May 26.

-- Written by Dan Freed in New York.

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