This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bank of America vs. Citigroup: Which Is the Worst?

NEW YORK ( TheStreet) -- Bank of America (BAC - Get Report) has borne the brunt of investor negativity about bank stocks in 2011, but there are signs Citigroup (C - Get Report) could reclaim that dubious distinction.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Bank of America shares are still down by 47.45% for the year through Thursday--weaker than Citigroup's 40.85% losses over the same time period, but as the above chart demonstrates, that trend has reversed during the past week.

During Wednesday's sharp selloff, Citigroup lost 6.25% versus 6.03% for Bank of America. Citi was down by as much as 7.8% minutes before the close, but a late rally closed the gap with Bank of America. That is a far cry from the Aug. 8 selloff, when Bank of America lost 20.3% versus a 16.4% loss for Citigroup.

While both stocks continue to underperform Wells Fargo (WFC - Get Report)and JPMorgan Chase (JPM - Get Report), the weakness of Citigroup may be a surprise to some observers, who have been arguing the bank's rebuilt balance sheet and relative lack of exposure to the toxic U.S. mortgage market and related legal threats make it a far safer bet than Bank of America--not to mention that its global exposure offers it greater growth potential than other U.S. banks.

But the global exposure may be coming back to haunt Citigroup. Given the severity of the crisis in Europe, investors may be figuring that Citigroup is more exposed to danger.

On a pure valuation basis, Bank of America is cheaper. As of Thursday's close, it traded at 0.35 times book, according to Bloomberg data, versus 0.46 times for Citigroup, 0.78 times for JPMorgan and 1.02 times for Wells Fargo. On a price-to-tangible-book basis, the stocks are both at 0.57 versus 1.12 and 1.41 for JPMorgan and Wells, respectively.

Because the U.S. Treasury gave Citigroup the biggest bailout of the big four, regulators made sure Citigroup's balance sheet was rock solid before it allowed the bank to pay back the government's preferred equity stake in the bank. As a result, Citigroup's Tier 1 capital ratio of 13.55% is stronger than Bank of America's, or even that of JPMorgan or Wells.

Bank of America is the weakest of the group at 11%, though it has lately stepped up its selling of assets in a bid to fix that problem. Those moves, however, can be painful. Bank of America recently announced it would part with its Canadian credit card operations at a time when credit cards have been one of the stronger businesses for banks.

If the stock market turns, it's a safe bet both stocks will rocket higher, but it's hard to say which one will outperform. If things get really scary, Citigroup's balance sheet appears more defensive, but, again, there's that global exposure to worry about. Just as U.S. Treasuries have been a surprising safe haven during the selloff, the bank with the greater U.S. exposure may prove similarly attractive to investors.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.56 0.00%
C $46.28 0.00%
JPM $63.20 0.00%
WFC $49.98 0.00%
AAPL $93.74 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs