(Reuters) -Citigroup Inc's shares rose nearly 8% after a new $3 billion bet by billionaire investor Warren Buffett's Berkshire Hathaway (NYSE:BRKa) Inc boosted confidence in the battered Wall Street lender's stock.

Berkshire built its stake in Citigroup (NYSE:C) in the quarter ended March 31, taking advantage of a 5% pullback in shares during the period as U.S. banks' stocks slid on fears of slowing economic growth.

The shares have slumped 38% over the past 12 months, the most among major Wall Street banks.

"Citi is one of the cheapest stocks in the market," said Thomas Hayes, chairman at Great Hill Capital in New York.

"With Buffett 'blessing' it, it should finally get the interest it deserves and attract some buying interest in coming weeks and months."

Citi, which lags the financial performance of its peers, is undergoing an overhaul led by Chief Executive Officer Jane Fraser. It is also working to fix its risk and compliance systems after regulatory orders.

"The (Berkshire) investment seems like it gives validation to CEO Jane Fraser as an effective financial architect. However, it has no bearing on what's needed most, and that is the building out and completion of the transformation plan," Wells Fargo (NYSE:WFC) analyst Mike Mayo said.

The latest investment takes Berkshire's interest in Citi to 2.8%, making it the fourth largest shareholder, according to Refinitiv data.

Investing in so-called value stocks - assets trading below their intrinsic value - has a broad following and Warren Buffett is a prominent proponent of this investment style.

Berkshire also exited its 33-year-old investment in Wells Fargo & Co.