This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Citigroup Better Than Bank of America: Analyst

Stocks in this article: C BAC JPM

NEW YORK ( TheStreet) -- The stock of Citigroup (C) has been unduly punished in the recent market turmoil, according to UBS analysts.

In a report Thursday, the team of analysts led by William Tanona, argue that Citi's shares have performed roughly in line with Bank of America's (BAC), which they say is unwarranted given "the dramatic differences in fundamentals between the two companies."

The stocks of Bank of America and Citigroup have fallen 47% and 41% respectively year-to-date, more than the decline in the SPDR Select Sector Financials ETF (XLF), which has dropped 22%.

But the analysts note that bond spreads, earnings, capital and other fundamentals tell "meaningfully different stories" when comparing the two companies.

>> Citigroup Selloff is Overdone

The stock market and bond market appears to have taken divergent views on the stock, the analysts noted.

While shares of Citigroup have raced to the bottom with BofA, the bond market has more confidence. The cost to protect against a Citigroup default increased moderately -- with credit default swaps (CDS) trading at 189 basis points over the cost of a Citigroup bond -- while BofA CDS spreads are now at 297 basis points. Spreads on JPMorgan Chase (JPM) CDS (considered the healthiest of the big four) are trading at 115 basis points.

Meanwhile, Citi also has much less uncertainty surrounding its earnings power. "Citi is not facing questions about its capital position, the company has less exposure to rep and warranty liabilities, and has a mortgage servicing business that is roughly a third the size of BofA's," the report said.

"In our view, the market will eventually recognize that Citi is better positioned and faces far less dramatic uncertainty from large, mortgage-related liabilities than BofA. We believe this should lead to a premium multiple to BofA, which should lead to attractive relative returns for Citi shareholders," the analysts said.

Other analysts have also argued that Citigroup's selloff is overdone . "Citigroup is still viewed more in the Bank of America camp than in JPMorgan Chase camp, though I would disagree," Raymond James analyst Anthony Polini, told TheStreet last week. "It carries a higher risk perception that has more to do with its recent past. People still remember Citi as the bank that needed government support," he added.

Readers Also Like:

--Written by Shanthi Bharatwaj in New York

>To contact the writer of this article, click here: Shanthi Bharatwaj.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs