NEW YORK ( TheStreet) -- Shares of Citigroup ( C) could nearly double over the next three years as a "long pipeline of tailwinds" start to kick in, according to UBS analyst Brennan Hawken. The analyst upgraded the stock to a "buy" rating from a from neutral rating, with a $62.00 price target, said in a report on Monday that "investors will gain greater comfort with Citi's outlook due to a shrinking earnings headwind in Citi Holdings, increased visibility around capital generation, and improving efficiency as Citi becomes an operating story under new CEO Mike Corbat." Hawken sees four elements in to Citi's earnings improvement, playing out over the next several years. First, there is a lot of upside in Citi shares just from the eventual elimination of the drag on earnings from Citi Holdings. Hawken expects losses at the non-core subsidiary known as the "bad bank," to shrink from $6 billion in 2012 to $1.7 billion in 2013. Second, shrinking the Holdings portfolio will free up $10 billion in capital over the next two years. "Citi has more capital trapped on its balance sheet than any other universal bank, and we believe a healing housing market and moderately improving economic outlook in the US provides a much needed tailwind for Citi to release it," Hawken wrote. Hawken expects Citi to begin releasing mortgage reserves in mid-2013, and said the bank could release roughly $2 billion in 2013 and $2.2 billion in 2014. Third, hitting efficiency ratios could provide further upside. Citi CEO Mike Corbat recently set a new efficiency ratio target at the mid-50s for the bank as a whole to be achieved by mid-2015. "If we were to embed reasonable/moderate assumptions (for loan growth, etc) for 2015 and reflect the midpoint of the range for the target efficiency ratios, it results in $0.75 EPS growth (13%), just from cost cutting," Hawken estimated. Finally, there is upside from potential release of unused tax benefits ( deferred tax assets), which the market is not pricing in at the moment. Citigroup also did better than expected in the Dodd-Frank stress tests. "The confirmation during this year's stress test that Citi is no longer in the penalty box with regulators is a very positive sign for the ability to return excess capital Citi is able to unlock over the next several years," Hawken wrote. Citi's shares were up slightly in noon trading on Monday, rising 0.2% to $46.75. -- Written by Shanthi Bharatwaj in New York.