(Adds Baird upgrades)

By Ratul Ray Chaudhuri

BANGALORE, Oct 14 (Reuters) - The U.S. government's plan to inject capital into beleaguered banks is "a game changer" and banks with thinnest capital will be the biggest beneficiaries, Citigroup said, upgrading 12 banks to "buy."

"This is the most significant development to date in the sense that in one action the Treasury has moved to address the greater issues of the day facing banks - capital, liquidity in the form of depositor protection, and the ability to issue debt," analyst Keith Horowitz wrote in a note to clients.

Citigroup views Bank of America (BAC.N: Quote, Profile, Research) as the greatest gainer among large banks and sees BB&T (BBT.N: Quote, Profile, Research) as the best positioned among mid-sized regional banks. [nWNAS4848]

Separately, Citigroup analyst Prashant Bhatia raised his rating on Goldman Sachs (GS.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research) ratings to "buy" from "hold," saying the government actions are unique as they benefit both the existing debt and equity holders.

Robert W. Baird & Co upgraded Wells Fargo & Co (WFC.N: Quote, Profile, Research), Fifth Third Bancorp (FITB.O: Quote, Profile, Research) and SunTrust Banks Inc (STI.N: Quote, Profile, Research) to "outperform" from "neutral," saying the ability to raise cheap capital will enable investors to benefit from the "normalized" earnings power in the long term.

The U.S. Treasury Department on Tuesday unveiled a plan to inject $250 billion into U.S. banks to beat back a credit crisis that threatens to swamp the economy. [nN14511679]

Citigroup's Horowitz said this plan seems focused on encouraging private capital to start flowing back into the system.