Banking duel: Bank of America vs. Citigroup. Who is better?
Today, we'll do another comparison. But this time we'll look at 2 big US banks. Which one is better off now, according to analysts, and thus better to buy? Let's take a look.
Citigroup is up 3.5% year-over-year, while Bank of America is down 12% year-over-year. It should be noted that large banks and institutions are considered recession-proof, thanks to their extensive capital reserves and ability to adapt to changing market conditions. Both of these financial giants play a key role in the global economy and present interesting investment opportunities for investors. Let's take a look at how both banks are performing in light of macroeconomic factors and what analysts believe is their potential for growth.
Bank of America Corp. $BAC+0.8%
Bank of America
BACBank of America is one of the largest banking institutions in the United States and the world. It was founded in 1904 as Bank of Italy and later became Bank of America as we know it today. Its headquarters are located in Charlotte, North Carolina. Bank of America provides a wide range of financial services, including personal and business banking, investment banking, wealth management, and lending services.
As one of the largest banks, Bank of America has an extensive network of branches and ATMs throughout the United States, providing access to its services for a large portion of the American population. Because of its size and scale, Bank of America also has strong relationships with corporate clients and major global institutions.
For comparison, we use ratios from the financial sector as a whole. So when we look at this sector, the ratios are as follows.
- The P/E of the financial sector as a whole is currently 14.06. So from a P/E perspective, Bank of America appears to be quite undervalued. It currently has a P/E of 8.36.
- The P/S of the entire financial sector is 2.15. From a P/S perspective, Bank of America again appears to be slightly overvalued. Its P/S is 2.48.
- The P/B for the sector as a whole is 1.40. Here again, from this perspective, Bank of America appears to be quite undervalued. Its P/B is 0.92.
Bank of America has a neutral view, with a solid dividend yield of 2.92%, and is considered fairly valued. Its average price target set by analysts who have looked at this stock recently is $36.35, implying upside potential of 24.4%
Citigroup Inc. $C-0.2%
Citigroup is another large U.S. banking institution headquartered in New York. It was founded in 1812 as the City Bank of New York and later grew to become the global financial institution we know today. Citigroup provides a wide range of financial services such as personal and corporate banking, investment banking, wealth management, lending services and insurance services.
One of the main features of Citigroup is its strong international presence. The bank has branches and offices in more than 160 countries, allowing it to diversify its revenue sources more effectively and reduce its dependence on particular markets or economies. This means that Citigroup can be less sensitive to local economic fluctuations and can better take advantage of global opportunities.
Again, we use ratios from the financial sector as a whole for comparison. So when we look at this sector, the ratios are as follows.
- The P/E of the financial sector as a whole is currently 14.06. So from a P/E perspective, Citigroup appears to be quite undervalued. In fact, it currently has a P/E of 6.36.
- The P/S of the entire financial sector is 2.15. From a P/S perspective, Citigroup again appears to be slightly overvalued. Its P/S is 0.99.
- The P/B of the whole sector is 1.40. Here again, from this perspective, Citigroup appears to be quite undervalued. Its P/B is 0.49.
Citigroup has a bullish view, with an attractive dividend yield of 4.3%, and may be undervalued. Its average price target set by analysts is $55.86, implying upside potential of 19.2%.
Conclusion
Both $C-0.2%, and $BAC+0.8% are both very high quality companies, and you probably won't go wrong with either of them. But at the moment, $C-0.2% probably seems like the better choice from this quick look ,-0.2% why? It's simple, Citigroup is better valued on a ratio basis, and it also offers a currently higher dividend yield. The only way Bank of America currently outperforms Citigroup is in analysts' expectations for growth. This is just a quick look at the two banks, for a more detailed comparison you need to do a deeper analysis of both companies. Also, it is good to diversify and not bet everything on one card.
WARNING: I am not a financial advisor, and this material does not serve as a financial or investment recommendation. The content of this material is purely informational.
