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BofA or Citigroup: Which is the Better Big Bank Stock?
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Bank of America Corporation (BAC - Free Report) and Citigroup Inc. (C - Free Report) are two major regional bank stocks with market capitalization of $230.6 billion and $161.6 billion, respectively. Both are part of the Major Regional Banks industry, which has a Zacks Industry Rank #46 (top 18%).
Both banks are influenced by the same economic backdrop as they have almost similar global exposure. Also, improving rate environment will prove beneficial for both the banks. Further, they are expected to benefit from the industry’s affluence, which is expected in the near term, due to lesser regulations and lower taxes under the Trump administration.
Since the election results in Nov 2016, BofA’s shares jumped 43.8% while Citigroup returned 19.4%. Moreover, they both outperformed the broader industry’s gain of 18.9% for the same time frame.
As the businesses of both the banks is almost similar, let’s dig deeper into to the financials, before deciding which one is a better investment option.
BofA
BofA, headquartered in Charlotte, NC, provides a diverse range of banking and non-banking financial services and products across the globe.
BofA has a trailing 12-month Return on Equity (ROE) of 6.24% compared with the industry average of 8.92%. This shows it is less efficient in reinvesting its earnings.
Nonetheless, BofA stock looks undervalued with respect to its Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios. It has a P/E ratio of 13.22 compared with the industry average of 14.21. Also, the company’s P/B ratio of 0.96 is below the industry average of 1.37.
Additionally, BofA has a dividend yield of 1.30%. Further, the bank’s current-year earnings are projected to grow 16.6% while sales are expected to increase 8.1%.
Also, analysts seem optimistic about the stock’s earnings performance. Over the last 60 days, the stock witnessed three upward revisions (against no downward movement) for 2017.
BofA carries a Zacks Rank #2 (Buy). However, it has a Value Score of ‘D’. Our research shows that stocks with a Value Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Citigroup
Citigroup, based in New York, is a globally diversified financial services company. It provides a range of financial products and services including consumer banking and credit, corporate and investment banking, securities brokerage and wealth management.
Citigroup has a trailing 12-month ROE of 6.35% compared with the industry average of 8.92%. This shows that it reinvests its earnings less efficiently compared to its peers.
However, Citigroup stock looks undervalued with respect to its P/E and P/B ratios. It has a P/E ratio of 11.20 compared with the industry average of 14.21. Also, the company’s P/B of 0.78 is below the industry average of 1.37.
Further, Citigroup has a dividend yield of 1.10%. Also, the bank’s earnings for the current year are projected to be 9.4% while sales growth is estimated to be 2.4%.
Moreover, analysts seem optimistic about the stock’s earnings prospects. Over the last 60 days, the stock has witnessed one upward revision (against no downward movement) for 2017.
While BofA looks better positioned in terms of dividend yield as well as earnings and sales growth expectations, Citigroup’s superior ROE compared with BofA, along with a Zacks Rank #2 and Value Score of ‘B,’ make it a better pick.
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BofA or Citigroup: Which is the Better Big Bank Stock?
Bank of America Corporation (BAC - Free Report) and Citigroup Inc. (C - Free Report) are two major regional bank stocks with market capitalization of $230.6 billion and $161.6 billion, respectively. Both are part of the Major Regional Banks industry, which has a Zacks Industry Rank #46 (top 18%).
Both banks are influenced by the same economic backdrop as they have almost similar global exposure. Also, improving rate environment will prove beneficial for both the banks. Further, they are expected to benefit from the industry’s affluence, which is expected in the near term, due to lesser regulations and lower taxes under the Trump administration.
Since the election results in Nov 2016, BofA’s shares jumped 43.8% while Citigroup returned 19.4%. Moreover, they both outperformed the broader industry’s gain of 18.9% for the same time frame.
As the businesses of both the banks is almost similar, let’s dig deeper into to the financials, before deciding which one is a better investment option.
BofA
BofA, headquartered in Charlotte, NC, provides a diverse range of banking and non-banking financial services and products across the globe.
BofA has a trailing 12-month Return on Equity (ROE) of 6.24% compared with the industry average of 8.92%. This shows it is less efficient in reinvesting its earnings.
Nonetheless, BofA stock looks undervalued with respect to its Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios. It has a P/E ratio of 13.22 compared with the industry average of 14.21. Also, the company’s P/B ratio of 0.96 is below the industry average of 1.37.
Additionally, BofA has a dividend yield of 1.30%. Further, the bank’s current-year earnings are projected to grow 16.6% while sales are expected to increase 8.1%.
Also, analysts seem optimistic about the stock’s earnings performance. Over the last 60 days, the stock witnessed three upward revisions (against no downward movement) for 2017.
BofA carries a Zacks Rank #2 (Buy). However, it has a Value Score of ‘D’. Our research shows that stocks with a Value Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Citigroup
Citigroup, based in New York, is a globally diversified financial services company. It provides a range of financial products and services including consumer banking and credit, corporate and investment banking, securities brokerage and wealth management.
Citigroup has a trailing 12-month ROE of 6.35% compared with the industry average of 8.92%. This shows that it reinvests its earnings less efficiently compared to its peers.
However, Citigroup stock looks undervalued with respect to its P/E and P/B ratios. It has a P/E ratio of 11.20 compared with the industry average of 14.21. Also, the company’s P/B of 0.78 is below the industry average of 1.37.
Further, Citigroup has a dividend yield of 1.10%. Also, the bank’s earnings for the current year are projected to be 9.4% while sales growth is estimated to be 2.4%.
Moreover, analysts seem optimistic about the stock’s earnings prospects. Over the last 60 days, the stock has witnessed one upward revision (against no downward movement) for 2017.
Citigroup has a Value Score of ‘B’ and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Take
While BofA looks better positioned in terms of dividend yield as well as earnings and sales growth expectations, Citigroup’s superior ROE compared with BofA, along with a Zacks Rank #2 and Value Score of ‘B,’ make it a better pick.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>