(

Updated with stock price moves, added Reuters/Breakingviews report on AIG unit sale, Citigroup CFO comments

.)

NEW YORK (

TheStreet

) --

American International Group

(AIG) - Get Report

shares reversed ground, putting the stock among the losers of the financial sector Thursday, after the insurer announced a new pay incentive plan for employees.

AIG

gained ground after the insurer unveiled a new incentive pay system where employees will be ranked on a scale of 1 to 4, based on how they do relative to their peers.

"These ratings will help ensure that our people are accountable, recognized and rewarded for their achievements," a spokesperson told

Reuters

. The move follows public outrage over AIG bonus payments following the insurer's massive bailout by the U.S. government.

Shares of AIG lost ground, though, after

Reuters/Breakingviews

reported that in an attempt to sell its American Life Insurance, or Alico, unit to

MetLife

(MET) - Get Report

, AIG may receive stock as part of the potential $15 billion deal.

After rallying more than 16% Wednesday and starting Thursday's session with gains,

AIG

shares were lately down 32 cents, or 1.2%, to $26.60.

Elsewhere, U.S. bank stocks traded mixed, even as the broader indices traded solidly higher on European leaders' pledge to help Greece with its debt crisis. The uneven trading came as Senate Banking Committee Chairman Christopher Dodd (D., Conn.) said he will work on bipartisan reform legislation with fellow committee member Bob Corker (R., Tenn.).

Dodd's announcement came after efforts to craft a bipartisan plan with Sen. Richard Shelby (R., Ala.) fell apart over the proposed creation of a Consumer Protection Agency.

Among U.S. bank stocks trading lower,

Morgan Stanley

(MS) - Get Report

lost 2.2% to $26.90, and

Bank of America

(BAC) - Get Report

slipped 0.2% to $14.64.

TheStreet Recommends

On the upside,

Citigroup

(C) - Get Report

tacked on 0.3% to $3.21,

JPMorgan Chase

(JPM) - Get Report

added 0.4% to $39.02, and

Goldman Sachs

(GS) - Get Report

was up 0.4% to $154.17.

Rochdale Securities analyst Dick Bove was out with separate research notes on Bank of America and Citigroup late Wednesday. Bove argues that Citigroup is clearly getting stronger but it still has a long way to go, and that Bank of America's outlook for the home loan business is for more losses.

"In sum, the company is getting stronger but this will not show up clearly until the second half of 2010," Bove wrote of Citigroup in a research note. He says that in 2010, loan losses are still going to hold back the growth in Citicorp's regional banking business.

"Both the credit card and mortgage sector will be under pressure for some time," Bove wrote of Citigroup. "However, the problems in these businesses may be isolated mainly to the United States since there are recovery signs outside of this country."

Meanwhile, Bove said that Barbara DeSoer, the president of Bank of America Home Loans provided some insights into her business Wednesday in Florida, adding that it "was not terribly encouraging."

"Ms. DeSoer sees a stabilization of the home loan business but it is clear that this segment of Bank of America will lose money for at least another 4 to 6 quarters," Bove wrote. "Fortunately, the bank has a series of other businesses, many of which are likely to be quite profitable."

Bove also said

Wells Fargo

made a presentation in Florida Wednesday, but that the bank has not dealt with the key question concerning company earnings.

"The company reviewed a number of the critical issues that have been troubling investors, notably capital and problem loans," Bove wrote. "It did not discuss in any detail the biggest issue related to company earnings of late and that is the mortgage servicing portfolio."

Wells Fargo shares were off 1% to $26.92.

Citigroup

was also in the headlines Thursday after Chief Financial Officer John Gerspach said during an investor presentation hosted by Credit Suisse that Citigroup paid its employees competitively last year, according to Reuters.

"We're not fighting with any hands behind our back," Gerspach said, according to the report.

In earnings news,

Credit Suisse

(CS) - Get Report

fell 0.7% to $43.08 after the bank swung to a fourth-quarter profit that was below estimates.

-- Written by Robert Holmes in Boston

.

Follow Robert Holmes on

Twitter

and become a fan of TheStreet.com on

Facebook.