Action over the past couple weeks following the Fed's rate cut is beginning to make the sovereign wealth funds in Abu Dhabi and Singapore look prescient for buying into the likes of Citigroup (C) and UBS (UBS) earlier this month at lower prices that were not too far from their 2002 bottoms.

Yes, I did say 2002. Not April or August of last year -- but their levels at the bottom of the millennial bear market, the area from which they went on to triple over the next five years.

Though Citigroup's recent fourth-quarter results are ugly enough to send most investors for the hills, there are some positive things happening at the bank. Let me give you the good, before the bad and the ugly, and explain why analysts believe that Citi might well be a bargain at its current levels. In 2006 it was ranked as the most profitable bank in the world, with its $22.13 billion net barely beating the U.K.'s HSBC. Adjusted for purchasing-power parity, that amount equates to more money than the gross domestic product of 115 countries.

And despite the bank's massive size, international consumer activities were at record profits as new branches were able to consistently increase their deposits. Net interest income increased by 3.6% globally and non-interest income was up by 8.6%, with the gains shared close to equally between domestic and global operations. Domestic credit card revenues have also shown strength, posting a 1.8% organic increase in open accounts. The gain is unusual and should be looked at differently than the seasonal increases that also look healthy.

Management's recent decisions to boost targeted capital ratios have also brightened the short-term horizon. Citigroup's recent capital raising activities have brought in almost $30 billion and have boosted its Tier One capital -- which is a core measure of financial strength on a regulatory basis -- to be on par with the industry's current leaders. Other than the investment by the Abu Dhabi Investment Authority, Citi has raised $15.4 billion from two private placements of convertible preferred securities and $3.25 billion from a public offering of straight preferred equity. Though it has cut its dividend by approximately 40%, it has also used the last two quarters to nearly double its loan-loss reserves, which have increased by $7.2 billion to $16.2 billion, or 2.1% of total loans outstanding.

Fourth-quarter results bring the bad and ugly into the light, as the net loss of $9.83 billion can't be justified by anything but poor risk controls during the U.S. sub-prime debacle. The $18.2 billion markdown that Citigroup took on its portfolio of sub-prime securities and the $3.6 billion in capital that it pumped into its loan-loss reserves accounted for the gash in results compared with last year's earnings. But remember that the markdown in its sub-prime portfolios implies that virtually every loan defaults and projects that the bank will only recover about 50% of the principal that it's owed. This scenario is appearing less and less likely, and the actual value of many of its sub-prime holdings has seen very little deterioration so far.

Aside from its fourth-quarter results, Punk Ziegel analyst are expecting healthy profits to bounce back by the end of the year as an unhealthy yield-curve changes its shape to boost margins and sub-prime security markdowns result in less defaults than projections allow for. The fourth-quarter loss of $1.99 per share is expected to turn around to see gains in the range of $3.38 to $3.74 a share for 2008 and $4.09 to $4.84 per share for the following two years, respectively. If you have the risk tolerance and are looking at a five-year time horizon, Citigroup may be one of the stronger financial companies to emerge from the current credit crisis.