UPDATE 2-Pandit sees 1.25 pct return on Citicorp assets-FT

* Citicorp could earn nearly $20 bln a year by end 2012-FT

* CEO Pandit won't give profit target for Citicorp-FT (Adds detail, share movement)

NEW YORK, March 10 (Reuters) - Citigroup (C.N) Chief Executive Vikram Pandit is set to forecast returns of 1.25 percent a year or more on the bank's main assets within a few years, the Financial Times reported on Wednesday.

Pandit, set to speak at a conference on Thursday, will not give a specific profit target for Citicorp, the FT reported.

Pandit is expected to focus the market's attention on the performance of the Citicorp unit, which had more than $1 billion of assets at the end of December, out of Citigroup's total $1.86 billion.

If Citicorp's assets grow by about 5 percent a year, as some executives expect, the unit could earn roughly $20 billion by the end of 2012, a big increase from current levels, the FT reported.

Citigroup's performance depends not only on Citicorp, where it houses its main assets, but also on Citi Holdings, which has businesses and assets it is looking to shed.

Analysts have struggled to predict Citi Holdings' performance, which depends on the quality of its assets and the global economy.

But in recent days, investors have become much more hopeful about Citigroup's prospects -- the company's shares have risen 11 percent since Monday's close.

Shares of other hard-hit U.S. financial companies, including insurer American International Group (AIG.N), have also rallied.

The U.S. government, which owns more than a quarter of Citigroup's outstanding shares, is eligible to start selling portions of its stake in the middle of next week. The government will sell its shares only if it can do so at a profit.

Citigroup's shares closed at $3.96 on Wednesday. Taxpayers bought shares of the third-largest U.S. bank at $3.25 each.

Citigroup spokesman Jon Diat was not immediately available for comment. (Reporting by Dan Wilchins; Editing by Gary Hill)