NEW YORK - Citigroup's surprisingly low pricing of a stock offer this week provides a clear sign that investors are still nervous about the banking giant's ability to regain its financial health.

On Wednesday, Citigroup Inc. said it would sell 5.4 billion shares of stock at $3.15 a share to help repay $20 billion in government bailout loans. The price was 9 percent below where shares were trading before the announcement.

"The market is not buying the Citi story right now," said Alois Pirker, a research director at financial consultancy Aite Group L.L.C.

The U.S. government also balked at the deal, stepping away from selling a portion of its nearly 34 percent stake in Citigroup.

Citigroup shares tumbled 25 cents, or 7.25 percent, to close at $3.20 yesterday.

Analysts say Citi, which managed the underwriting of the offer itself, did not have much of a choice but to take the hit of selling at such a low price because of uncertainty surrounding the bank.

New York-based Citi still must demonstrate it can maintain profitability for an extended period.

Citigroup has been among the banks hit hardest by the credit crisis. It earned $101 million during the third quarter, before accounting for preferred stock dividends and the debt exchange that gave the government a stake in the bank. Including those items, Citi lost $3.24 billion.

The bank has to deal with continuing loan losses. It set aside $8 billion during the third quarter to cover loan losses.

Citi must also find buyers for some of the risky investments that got it into this predicament - Citi put its risky assets into a separate division earlier in the year.

Citi had to get the stock deal done or else it would be left further behind competitors, analysts say.

Already struggling to keep top talent and draw in new customers, Citi would have been the only big bank stuck under restrictions tied to receiving government bailout money, including caps on employee compensation.