Goldman analysts say they see "a clearer path for Citigroup to return capital" to shareholders in the form of buybacks and dividends, versus "higher execution risk" at Bank of America during the next 12-18 months as it needs to significantly reduce costs "without reducing earnings power, which is challenging."
Meanwhile, the analysts see "higher earnings power at Citigroup," including a 12% return on equity by 2014, including Citigroup's "bank bank" Citi Holdings Unit, while they argue Bank of America will continue to struggle to cover its cost of capital.
"Near-term expectations will be more achievable at [Citigroup] and should drive shares higher," the report states. However, the analysts believe it is already "priced in" to the stock that Bank of America will pass the Federal Reserve stress test.Goldman's analysts also added Morgan Stanley (MS)to the conviction buy list, while removing JPMorgan Chase (JPM) from the list. -- Written by Dan Freed in New York. Follow this writer on Twitter.
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