March 28 (Bloomberg) -- Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, was upgraded to ``buy'' from ``hold'' at Citigroup Inc., which said the bank's share price was ``extremely attractive.''

Lehman's recent profitable quarter and its strong liquidity position protected by the coordinated actions of the Federal Reserve and the U.S. Treasury to inject cash into the market provide ``excellent'' protection against a further decline in Lehman's share price, according to Citigroup.

``We estimate that writedowns aside, Lehman had its second best fixed income trading quarter ever,'' New York-based analyst Prashant Bhatia wrote in a research note to investors today. ``Lehman has ample liquidity to run its business.''

Speculation that Wall Street firms can't fund their operations has contributed to marked swings in banks' share prices. Bear Stearns Cos., which was the fifth-largest U.S. securities firm, was bailed out by the Fed two weeks ago after clients withdrew business amid rumors it didn't have the capital to weather the credit-market contraction.

Lehman has about $34 billion in liquidity and access to another $200 billion from the Federal Reserve's credit facility, according to the note. Citigroup kept its share price estimate at $65, saying it sees a 70 percent upside in Lehman's shares.

``The liquidity backstop buys the time necessary to restore confidence and quell fears that are not based on fundamentals,'' Bhatia said. ``Reality will trump fear.''

Lehman rose 1.8 percent at 9:05 a.m. in Frankfurt trading to $39.41. The bank has slumped 41 percent this year, cutting its market value to $20.5 billion.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

Last Updated: March 28, 2008 04:41 EDT