NEW YORK (
) -- It was a good week for
and a bad one for
even though not much has changed for either bank.
Citigroup shares gained 5.59% on the week to close at $3.96, while Wells Fargo shares lost 4.71% to finish on Friday at $28.69.
Bank of America
, meanwhile, were both down just over 1% on the week.
The initial catalyst was clearly a
released before the market opened Monday. Goldman raised Citigroup to buy from neutral, while dropping Wells to neutral from buy.
"There is ultimately a lot of earnings power that can drive the shares higher in the near term," Goldman's analysts wrote of Wells Fargo, "that said, we see more relative value in Bank of America, JPMorgan Chase and Citigroup, and there are near-term risks, including the over-earning of the mortgage servicing business (most pronounced at Wells) and above-peer
non-performing asset growth."
That hardly sounds like a slam of Wells. What's more, mortgage servicing ought to "over-earn" for some time, as lenders will likely struggle to collect on mortgage payments for quite a while. When that slows down, it will mean the economy is healing, which means other Wells Fargo businesses will benefit.
As for non-performing assets, that likely refers to bad loans left over from Wells Fargo's acquisition of Wachovia. Wells is a management team that knows what it's doing, and will do a better job at addressing those loans than most banks would.
When the Goldman analysts held a conference call with investors on Monday to discuss their outlook for financials, they were asked about the Wells downgrade and sounded even less negative on Wells than they did in their report.
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"The main reason for the downgrade was to make room for the upgrade of Citigroup," said Goldman's Richard Ramsden.
Citigroup also benefitted from the
selling part of its stake and from the disclosure by hedge fund wizard
that he bought 150,000 shares. Even analyst Christopher Whalen of Institutional Risk Analytics, a longtime Citigroup critic, has
, though he seems to give most of the credit for Citigroup's turnaround to Treasury Secretary Tim Geithner.
Even after this week's action, there is undoubtedly more juice in Citigroup than Wells Fargo if we have a strong recovery. If the economy struggles, however, Wells Fargo's management team is probably a better bet to steer its company through the storm.
Written by Dan Freed in New York