By Arun Kumar

Washington, March 5 (IANS) Citigroup's Indian American CEO Vikram Pandit says the troubled banking giant is today "fundamentally different" and far healthier than when he took over thanks to an over $45 billion government bailout.

"I am pleased to say we are in a far different and much healthier position," Pandit said in testimony before the Congressional Oversight Panel Thursday. The independent watchdog group oversees the $700 billion financial bailout.

The bank had returned to being a bank, not "a financial supermarket", he said.

Facing sharp questions from the panel, he said taxpayers will likely end up with a profit on the entire set of Citi rescues. Among them: a $20 billion infusion that has been repaid, and $25 billion that was converted into common stock and has since gained value.

Calling the bailout funds a "bridge over crisis", Pandit said he looked forward to helping taxpayers realise a return on the 27 percent of Citi the government still owns.

Citi is one of the best capitalised banks in the world, with Tier 1 capital ratio of 11.7 percent, Tier 1 common ratio of 9.6 percent and loan loss reserves of $36 billion, reduced exposure to risky assets and a balance sheet that's been cut by half a trillion, he said.

Turning to lessons learned, Pandit said: "The entire financial system can systemically underestimate risk - and that an entire system can show hubris."

There was too much leverage, diversification didn't work because risk exposures were more "concentrated and correlated" than supposed, he said endorsing a "systemic regulator".

Herbert Allison, assistant treasury secretary for financial stability, said Citigroup's bailout was "warranted and necessary". If Citigroup had been allowed to falter, investors might have lost faith in the strength of other banks, he said.

"Due to the deterioration in confidence, there was concern that, without government assistance, Citigroup would not be able to obtain sufficient funding in the market over the following days," Allison said.

"A further deterioration of Citigroup would have led investors to doubt the ability and willingness of US policy makers to support US banking institutions and financial markets," he said, adding that the bank's presence in more than 100 countries also played a role in the government's decision.

The government has a $1.15 billion paper profit on its stake in Citigroup, the third-biggest US bank by assets, based on its 7.7 billion shares and the current stock price of $3.40.